Correlation Between Pinterest and Solventum Corp

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

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

Diversification Opportunities for Pinterest and Solventum Corp

0.17

Correlation Coefficient

Pinterest  Solventum Corp

Average diversification

The 3 months correlation between Pinterest and Solventum is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Pinterest and Solventum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solventum Corp and Pinterest 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 Pinterest are associated (or correlated) with Solventum Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solventum Corp has no effect on the direction of Pinterest i.e., Pinterest and Solventum Corp go up and down completely randomly.

Pair Corralation between Pinterest and Solventum Corp

Given the investment horizon of 90 days Pinterest is expected to generate 1.84 times more return on investment than Solventum Corp. However, Pinterest is 1.84 times more volatile than Solventum Corp. It trades about -0.01 of its potential returns per unit of risk. Solventum Corp is currently generating about -0.05 per unit of risk. If you would invest  3,046  in Pinterest on September 21, 2024 and sell it today you would lose (97.00) from holding Pinterest or give up 3.18% of portfolio value over 90 days.

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

Pinterest  vs.  Solventum Corp

Pinterest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pinterest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pinterest is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Solventum Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solventum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Solventum Corp is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Pinterest and Solventum Corp

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

The idea behind Pinterest and Solventum 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.