Correlation Between 3M and ARRWW Old

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

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

Diversification Opportunities for 3M and ARRWW Old

0.0

Correlation Coefficient

3M  ARRWW Old

Pay attention - limited upside

The 3 months correlation between 3M and ARRWW is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and ARRWW Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARRWW Old 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 ARRWW Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARRWW Old has no effect on the direction of 3M i.e., 3M and ARRWW Old go up and down completely randomly.

Pair Corralation between 3M and ARRWW Old

If you would invest  13,036  in 3M Company on October 25, 2024 and sell it today you would earn a total of  1,876  from holding 3M Company or generate 14.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	5.56%
Values	Daily Returns

3M Company  vs.  ARRWW Old

3M Company

Risk-Adjusted Performance

16 of 100

Good

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. In spite of very uncertain primary indicators, 3M displayed solid returns over the last few months and may actually be approaching a breakup point.

ARRWW Old

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with 3M and ARRWW Old

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

The idea behind 3M Company and ARRWW Old 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.