Correlation Between Westport Fuel and 3M

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

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

Diversification Opportunities for Westport Fuel and 3M

0.31

Correlation Coefficient

Westport Fuel  3M

Weak diversification

The 3 months correlation between Westport and 3M is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Westport Fuel Systems and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and Westport Fuel 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 Westport Fuel Systems are associated (or correlated) with 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of Westport Fuel i.e., Westport Fuel and 3M go up and down completely randomly.

Pair Corralation between Westport Fuel and 3M

Given the investment horizon of 90 days Westport Fuel Systems is expected to generate 2.48 times more return on investment than 3M. However, Westport Fuel is 2.48 times more volatile than 3M Company. It trades about 0.07 of its potential returns per unit of risk. 3M Company is currently generating about 0.01 per unit of risk. If you would invest  412.00  in Westport Fuel Systems on September 13, 2024 and sell it today you would earn a total of  14.00  from holding Westport Fuel Systems or generate 3.4% return on investment over 90 days.

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

Westport Fuel Systems  vs.  3M Company

Westport Fuel Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westport Fuel Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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.

Pair Trading with Westport Fuel and 3M

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

The idea behind Westport Fuel Systems and 3M Company 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.