Correlation Between 3M and SANUWAVE Health

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Can any of the company-specific risk be diversified away by investing in both 3M and SANUWAVE Health 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 SANUWAVE Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and SANUWAVE Health, you can compare the effects of market volatilities on 3M and SANUWAVE Health 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 SANUWAVE Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and SANUWAVE Health.

Diversification Opportunities for 3M and SANUWAVE Health

3MSANUWAVEDiversified Away3MSANUWAVEDiversified Away100%
-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between 3M and SANUWAVE is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and SANUWAVE Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANUWAVE Health 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 SANUWAVE Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANUWAVE Health has no effect on the direction of 3M i.e., 3M and SANUWAVE Health go up and down completely randomly.

Pair Corralation between 3M and SANUWAVE Health

Considering the 90-day investment horizon 3M Company is expected to under-perform the SANUWAVE Health. But the stock apears to be less risky and, when comparing its historical volatility, 3M Company is 5.84 times less risky than SANUWAVE Health. The stock trades about -0.03 of its potential returns per unit of risk. The SANUWAVE Health is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  713.00  in SANUWAVE Health on September 16, 2024 and sell it today you would earn a total of  1,311  from holding SANUWAVE Health or generate 183.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

3M Company  vs.  SANUWAVE Health

 Performance 
JavaScript chart by amCharts 3.21.15OctNov 050100150200250
JavaScript chart by amCharts 3.21.15MMM SNWV
       Timeline  
3M Company 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec125130135140
SANUWAVE Health 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in SANUWAVE Health are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SANUWAVE Health showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec101520

3M and SANUWAVE Health Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.21-1.66-1.11-0.56-0.01850.511.061.612.162.71 0.050.100.150.20
JavaScript chart by amCharts 3.21.15MMM SNWV
       Returns  

Pair Trading with 3M and SANUWAVE Health

The main advantage of trading using opposite 3M and SANUWAVE Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, SANUWAVE Health 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 SANUWAVE Health will offset losses from the drop in SANUWAVE Health's long position.
The idea behind 3M Company and SANUWAVE Health 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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