Correlation Between 3M and Mikron Holding

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

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

Diversification Opportunities for 3M and Mikron Holding

-0.32

Correlation Coefficient

3M  Mikron Holding

Very good diversification

The 3 months correlation between 3M and Mikron is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Mikron Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mikron Holding AG 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 Mikron Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mikron Holding AG has no effect on the direction of 3M i.e., 3M and Mikron Holding go up and down completely randomly.

Pair Corralation between 3M and Mikron Holding

Assuming the 90 days trading horizon 3M Company is expected to generate 0.54 times more return on investment than Mikron Holding. However, 3M Company is 1.84 times less risky than Mikron Holding. It trades about 0.02 of its potential returns per unit of risk. Mikron Holding AG is currently generating about -0.2 per unit of risk. If you would invest  11,100  in 3M Company on September 15, 2024 and sell it today you would earn a total of  100.00  from holding 3M Company or generate 0.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

3M Company  vs.  Mikron Holding AG

3M Company

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable primary indicators, 3M is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Mikron Holding AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mikron Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with 3M and Mikron Holding

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

The idea behind 3M Company and Mikron Holding AG 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.