Correlation Between Meta Platforms and Legacy Education

Can any of the company-specific risk be diversified away by investing in both Meta Platforms and Legacy Education at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Meta Platforms and Legacy Education into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Meta Platforms and Legacy Education, you can compare the effects of market volatilities on Meta Platforms and Legacy Education and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Meta Platforms with a short position of Legacy Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Legacy Education.

Diversification Opportunities for Meta Platforms and Legacy Education

-0.5

Correlation Coefficient

Meta Platforms  Legacy Education

Very good diversification

The 3 months correlation between Meta and Legacy is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Legacy Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Education and Meta Platforms is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Meta Platforms are associated (or correlated) with Legacy Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Education has no effect on the direction of Meta Platforms i.e., Meta Platforms and Legacy Education go up and down completely randomly.

Pair Corralation between Meta Platforms and Legacy Education

Given the investment horizon of 90 days Meta Platforms is expected to generate 8.09 times less return on investment than Legacy Education. But when comparing it to its historical volatility, Meta Platforms is 1.92 times less risky than Legacy Education. It trades about 0.18 of its potential returns per unit of risk. Legacy Education is currently generating about 0.74 of returns per unit of risk over similar time horizon. If you would invest  402.00  in Legacy Education on July 19, 2024 and sell it today you would earn a total of  180.00  from holding Legacy Education or generate 44.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	23.44%
Values	Daily Returns

Meta Platforms  vs.  Legacy Education

Meta Platforms

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Meta Platforms sustained solid returns over the last few months and may actually be approaching a breakup point.

Legacy Education

Risk-Adjusted Performance

58 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Legacy Education are ranked lower than 58 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Legacy Education showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meta Platforms and Legacy Education

The main advantage of trading using opposite Meta Platforms and Legacy Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, Legacy Education can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Legacy Education will offset losses from the drop in Legacy Education's long position.

The idea behind Meta Platforms and Legacy Education pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.