Correlation Between 3M and MASSMU

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

By analyzing existing cross correlation between 3M Company and MASSMU 5672 01 DEC 52, you can compare the effects of market volatilities on 3M and MASSMU 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 MASSMU. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and MASSMU.

Diversification Opportunities for 3M and MASSMU

-0.42

Correlation Coefficient

3M  MASSMU

Very good diversification

The 3 months correlation between 3M and MASSMU is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and MASSMU 5672 01 DEC 52 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MASSMU 5672 01 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 MASSMU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MASSMU 5672 01 has no effect on the direction of 3M i.e., 3M and MASSMU go up and down completely randomly.

Pair Corralation between 3M and MASSMU

Considering the 90-day investment horizon 3M Company is expected to under-perform the MASSMU. But the stock apears to be less risky and, when comparing its historical volatility, 3M Company is 1.01 times less risky than MASSMU. The stock trades about -0.05 of its potential returns per unit of risk. The MASSMU 5672 01 DEC 52 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  10,288  in MASSMU 5672 01 DEC 52 on September 25, 2024 and sell it today you would earn a total of  111.00  from holding MASSMU 5672 01 DEC 52 or generate 1.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	47.62%
Values	Daily Returns

3M Company  vs.  MASSMU 5672 01 DEC 52

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.

MASSMU 5672 01

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MASSMU 5672 01 DEC 52 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MASSMU is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 3M and MASSMU

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

The idea behind 3M Company and MASSMU 5672 01 DEC 52 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.