Correlation Between 3M and WPLAU

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

By analyzing existing cross correlation between 3M Company and WPLAU 37 15 MAR 28, you can compare the effects of market volatilities on 3M and WPLAU 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 WPLAU. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and WPLAU.

Diversification Opportunities for 3M and WPLAU

-0.29

Correlation Coefficient

3M  WPLAU

Very good diversification

The 3 months correlation between 3M and WPLAU is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and WPLAU 37 15 MAR 28 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPLAU 37 15 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 WPLAU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPLAU 37 15 has no effect on the direction of 3M i.e., 3M and WPLAU go up and down completely randomly.

Pair Corralation between 3M and WPLAU

Considering the 90-day investment horizon 3M Company is expected to generate 3.63 times more return on investment than WPLAU. However, 3M is 3.63 times more volatile than WPLAU 37 15 MAR 28. It trades about 0.04 of its potential returns per unit of risk. WPLAU 37 15 MAR 28 is currently generating about -0.01 per unit of risk. If you would invest  9,333  in 3M Company on September 21, 2024 and sell it today you would earn a total of  3,380  from holding 3M Company or generate 36.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	13.33%
Values	Daily Returns

3M Company  vs.  WPLAU 37 15 MAR 28

3M Company

Risk-Adjusted Performance

0 of 100

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.

WPLAU 37 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WPLAU 37 15 MAR 28 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for WPLAU 37 15 MAR 28 investors.

Pair Trading with 3M and WPLAU

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

The idea behind 3M Company and WPLAU 37 15 MAR 28 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.