Correlation Between SWISS WATER and 3M

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

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

Diversification Opportunities for SWISS WATER and 3M

-0.57

Correlation Coefficient

SWISS WATER  3M

Excellent diversification

The 3 months correlation between SWISS and 3M is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and SWISS WATER 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 SWISS WATER DECAFFCOFFEE 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 SWISS WATER i.e., SWISS WATER and 3M go up and down completely randomly.

Pair Corralation between SWISS WATER and 3M

Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to under-perform the 3M. In addition to that, SWISS WATER is 2.12 times more volatile than 3M Company. It trades about -0.06 of its total potential returns per unit of risk. 3M Company is currently generating about 0.21 per unit of volatility. If you would invest  11,989  in 3M Company on October 26, 2024 and sell it today you would earn a total of  2,309  from holding 3M Company or generate 19.26% return on investment over 90 days.

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

SWISS WATER DECAFFCOFFEE  vs.  3M Company

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SWISS WATER DECAFFCOFFEE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

3M Company

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, 3M reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SWISS WATER and 3M

The main advantage of trading using opposite SWISS WATER and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWISS WATER 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 SWISS WATER DECAFFCOFFEE 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.