Correlation Between Meta Platforms and Genius Sports

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

Diversification Opportunities for Meta Platforms and Genius Sports

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Meta Platforms and Genius is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Genius Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genius Sports 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 Genius Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genius Sports has no effect on the direction of Meta Platforms i.e., Meta Platforms and Genius Sports go up and down completely randomly.

Pair Corralation between Meta Platforms and Genius Sports

Allowing for the 90-day total investment horizon Meta Platforms is expected to generate 0.51 times more return on investment than Genius Sports. However, Meta Platforms is 1.94 times less risky than Genius Sports. It trades about -0.02 of its potential returns per unit of risk. Genius Sports is currently generating about -0.08 per unit of risk. If you would invest  26,431  in Meta Platforms on February 19, 2022 and sell it today you would lose (7,077)  from holding Meta Platforms or give up 26.78% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Meta Platforms  vs.  Genius Sports

 Performance (%) 
      Timeline 
Meta Platforms 
Meta Platforms Performance
0 of 100
Over the last 90 days Meta Platforms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Meta Platforms is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Meta Platforms Price Channel

Genius Sports 
Genius Performance
0 of 100
Over the last 90 days Genius Sports has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Genius Price Channel

Meta Platforms and Genius Sports Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Meta Platforms and Genius Sports

The main advantage of trading using opposite Meta Platforms and Genius Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, Genius Sports 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 Genius Sports will offset losses from the drop in Genius Sports' long position.
The idea behind Meta Platforms and Genius Sports 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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