Correlation Between Meta Platforms and Hilton Worldwide

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

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

Diversification Opportunities for Meta Platforms and Hilton Worldwide

0.74

Correlation Coefficient

Meta Platforms  Hilton Worldwide

Poor diversification

The 3 months correlation between Meta and Hilton is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Hilton Worldwide Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Worldwide Holdings 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 Hilton Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Worldwide Holdings has no effect on the direction of Meta Platforms i.e., Meta Platforms and Hilton Worldwide go up and down completely randomly.

Pair Corralation between Meta Platforms and Hilton Worldwide

Given the investment horizon of 90 days Meta Platforms is expected to under-perform the Hilton Worldwide. In addition to that, Meta Platforms is 2.11 times more volatile than Hilton Worldwide Holdings. It trades about -0.13 of its total potential returns per unit of risk. Hilton Worldwide Holdings is currently generating about -0.18 per unit of volatility. If you would invest  21,331  in Hilton Worldwide Holdings on January 28, 2024 and sell it today you would lose (1,119) from holding Hilton Worldwide Holdings or give up 5.25% of portfolio value over 90 days.

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

Meta Platforms  vs.  Hilton Worldwide Holdings

Meta Platforms

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms are ranked lower than 4 (%) 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.

Hilton Worldwide Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Hilton Worldwide is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Meta Platforms and Hilton Worldwide

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

The idea behind Meta Platforms and Hilton Worldwide Holdings 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.