Correlation Between Apple and Meta Platforms

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

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

Diversification Opportunities for Apple and Meta Platforms

0.75

Correlation Coefficient

Apple  Meta Platforms

Poor diversification

The 3 months correlation between Apple and Meta is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms and Apple 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 Apple Inc are associated (or correlated) with Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Apple i.e., Apple and Meta Platforms go up and down completely randomly.

Pair Corralation between Apple and Meta Platforms

Assuming the 90 days horizon Apple is expected to generate 1.38 times less return on investment than Meta Platforms. But when comparing it to its historical volatility, Apple Inc is 1.25 times less risky than Meta Platforms. It trades about 0.16 of its potential returns per unit of risk. Meta Platforms is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  46,950  in Meta Platforms on September 5, 2024 and sell it today you would earn a total of  9,300  from holding Meta Platforms or generate 19.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  Meta Platforms

Apple Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Apple reported solid returns over the last few months and may actually be approaching a breakup point.

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 nearly fragile basic indicators, Meta Platforms reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Meta Platforms

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

The idea behind Apple Inc and Meta Platforms 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..