Correlation Between Meta Platforms and Twilio

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

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

Diversification Opportunities for Meta Platforms and Twilio

0.0

Correlation Coefficient

Meta Platforms  Twilio

Pay attention - limited upside

The 3 months correlation between Meta and Twilio is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Twilio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twilio Inc 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 Twilio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twilio Inc has no effect on the direction of Meta Platforms i.e., Meta Platforms and Twilio go up and down completely randomly.

Pair Corralation between Meta Platforms and Twilio

If you would invest  1,404  in Twilio Inc on October 1, 2024 and sell it today you would earn a total of  1,319  from holding Twilio Inc or generate 93.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.64%
Values	Daily Returns

Meta Platforms  vs.  Twilio Inc

Meta Platforms

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Meta Platforms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Meta Platforms is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Twilio Inc

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Twilio Inc are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Twilio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meta Platforms and Twilio

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

The idea behind Meta Platforms and Twilio Inc 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.