Correlation Between 3M and NaturalShrimp

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

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

Diversification Opportunities for 3M and NaturalShrimp

-0.75

Correlation Coefficient

3M  NaturalShrimp

Pay attention - limited upside

The 3 months correlation between 3M and NaturalShrimp is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and NaturalShrimp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NaturalShrimp 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 NaturalShrimp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NaturalShrimp has no effect on the direction of 3M i.e., 3M and NaturalShrimp go up and down completely randomly.

Pair Corralation between 3M and NaturalShrimp

Considering the 90-day investment horizon 3M is expected to generate 54.01 times less return on investment than NaturalShrimp. But when comparing it to its historical volatility, 3M Company is 71.65 times less risky than NaturalShrimp. It trades about 0.21 of its potential returns per unit of risk. NaturalShrimp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.40  in NaturalShrimp on December 3, 2024 and sell it today you would lose (0.38) from holding NaturalShrimp or give up 95.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

3M Company  vs.  NaturalShrimp

3M Company

Risk-Adjusted Performance

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

NaturalShrimp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NaturalShrimp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent primary indicators, NaturalShrimp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 3M and NaturalShrimp

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

The idea behind 3M Company and NaturalShrimp 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.