Correlation Between Meta Platforms and TerraCom

Can any of the company-specific risk be diversified away by investing in both Meta Platforms and TerraCom 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 TerraCom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Meta Platforms and TerraCom Limited, you can compare the effects of market volatilities on Meta Platforms and TerraCom 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 TerraCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and TerraCom.

Diversification Opportunities for Meta Platforms and TerraCom

-0.77

Correlation Coefficient

Meta Platforms  TerraCom

Pay attention - limited upside

The 3 months correlation between Meta and TerraCom is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and TerraCom Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TerraCom Limited 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 TerraCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TerraCom Limited has no effect on the direction of Meta Platforms i.e., Meta Platforms and TerraCom go up and down completely randomly.

Pair Corralation between Meta Platforms and TerraCom

Given the investment horizon of 90 days Meta Platforms is expected to generate 0.09 times more return on investment than TerraCom. However, Meta Platforms is 10.86 times less risky than TerraCom. It trades about 0.01 of its potential returns per unit of risk. TerraCom Limited is currently generating about -0.12 per unit of risk. If you would invest  57,244  in Meta Platforms on July 30, 2024 and sell it today you would earn a total of  81.00  from holding Meta Platforms or generate 0.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	23.81%
Values	Daily Returns

Meta Platforms  vs.  TerraCom Limited

Meta Platforms

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Meta Platforms sustained solid returns over the last few months and may actually be approaching a breakup point.

TerraCom Limited

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days TerraCom Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak fundamental indicators, TerraCom reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meta Platforms and TerraCom

The main advantage of trading using opposite Meta Platforms and TerraCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, TerraCom 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 TerraCom will offset losses from the drop in TerraCom's long position.

The idea behind Meta Platforms and TerraCom Limited 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.