Correlation Between 3M and Sterling Check

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

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

Diversification Opportunities for 3M and Sterling Check

-0.52

Correlation Coefficient

3M  Sterling Check

Excellent diversification

The 3 months correlation between 3M and Sterling is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Sterling Check Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Check 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 Sterling Check. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Check Corp has no effect on the direction of 3M i.e., 3M and Sterling Check go up and down completely randomly.

Pair Corralation between 3M and Sterling Check

Considering the 90-day investment horizon 3M Company is expected to under-perform the Sterling Check. In addition to that, 3M is 1.27 times more volatile than Sterling Check Corp. It trades about -0.04 of its total potential returns per unit of risk. Sterling Check Corp is currently generating about -0.03 per unit of volatility. If you would invest  1,693  in Sterling Check Corp on September 19, 2024 and sell it today you would lose (19.00) from holding Sterling Check Corp or give up 1.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	49.21%
Values	Daily Returns

3M Company  vs.  Sterling Check 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 latest stock price disarray, may contribute to short-term losses for the investors.

Sterling Check Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sterling Check Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Sterling Check is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with 3M and Sterling Check

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

The idea behind 3M Company and Sterling Check 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.