Correlation Between 3M and Dundee Corp

Can any of the company-specific risk be diversified away by investing in both 3M and Dundee Corp 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 3M and Dundee Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 3M Company and Dundee Corp, you can compare the effects of market volatilities on 3M and Dundee Corp 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 3M with a short position of Dundee Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Dundee Corp.

Diversification Opportunities for 3M and Dundee Corp

-0.6

Correlation Coefficient

3M  Dundee Corp

Excellent diversification

The 3 months correlation between 3M and Dundee is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Dundee Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dundee Corp and 3M 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 3M Company are associated (or correlated) with Dundee Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dundee Corp has no effect on the direction of 3M i.e., 3M and Dundee Corp go up and down completely randomly.

Pair Corralation between 3M and Dundee Corp

Considering the 90-day investment horizon 3M Company is expected to generate 0.55 times more return on investment than Dundee Corp. However, 3M Company is 1.82 times less risky than Dundee Corp. It trades about -0.02 of its potential returns per unit of risk. Dundee Corp is currently generating about -0.34 per unit of risk. If you would invest  13,017  in 3M Company on September 17, 2024 and sell it today you would lose (70.00) from holding 3M Company or give up 0.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

3M Company  vs.  Dundee Corp

3M Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 3M Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, 3M is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Dundee Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dundee Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward-looking indicators, Dundee Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with 3M and Dundee Corp

The main advantage of trading using opposite 3M and Dundee Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Dundee Corp 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 Dundee Corp will offset losses from the drop in Dundee Corp's long position.

The idea behind 3M Company and Dundee Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.