Correlation Between Meta Platforms and Airbnb Inc

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Can any of the company-specific risk be diversified away by investing in both Meta Platforms and Airbnb Inc 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 Airbnb Inc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms Old and Airbnb Inc Cl, you can compare the effects of market volatilities on Meta Platforms and Airbnb Inc 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 Airbnb Inc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Airbnb Inc.

Diversification Opportunities for Meta Platforms and Airbnb Inc

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Meta Platforms and Airbnb is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms Old and Airbnb Inc Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbnb Inc Cl 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 Old are associated (or correlated) with Airbnb Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbnb Inc Cl has no effect on the direction of Meta Platforms i.e., Meta Platforms and Airbnb Inc go up and down completely randomly.

Pair Corralation between Meta Platforms and Airbnb Inc

Allowing for the 90-day total investment horizon Meta Platforms Old is expected to under-perform the Airbnb Inc. But the stock apears to be less risky and, when comparing its historical volatility, Meta Platforms Old is 2.34 times less risky than Airbnb Inc. The stock trades about 0.0 of its potential returns per unit of risk. The Airbnb Inc Cl is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,800  in Airbnb Inc Cl on April 1, 2022 and sell it today you would earn a total of  2,108  from holding Airbnb Inc Cl or generate 31.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy78.71%
ValuesDaily Returns

Meta Platforms Old  vs.  Airbnb Inc Cl

 Performance (%) 
      Timeline 
Meta Platforms Old 
Meta Platforms Performance
0 of 100
Over the last 90 days Meta Platforms Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Meta Platforms Price Channel

Airbnb Inc Cl 
Airbnb Performance
0 of 100
Over the last 90 days Airbnb Inc Cl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Airbnb Price Channel

Meta Platforms and Airbnb Inc Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Meta Platforms and Airbnb Inc

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

Airbnb Inc Cl

Pair trading matchups for Airbnb Inc

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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