Correlation Between Windrock Land and 3M

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

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

Diversification Opportunities for Windrock Land and 3M

0.09

Correlation Coefficient

Windrock Land  3M

Significant diversification

The 3 months correlation between Windrock and 3M is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Windrock Land Co and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and Windrock Land 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 Windrock Land Co are associated (or correlated) with 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of Windrock Land i.e., Windrock Land and 3M go up and down completely randomly.

Pair Corralation between Windrock Land and 3M

Given the investment horizon of 90 days Windrock Land is expected to generate 19.46 times less return on investment than 3M. In addition to that, Windrock Land is 2.26 times more volatile than 3M Company. It trades about 0.0 of its total potential returns per unit of risk. 3M Company is currently generating about 0.19 per unit of volatility. If you would invest  12,954  in 3M Company on December 27, 2024 and sell it today you would earn a total of  2,314  from holding 3M Company or generate 17.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Windrock Land Co  vs.  3M Company

Windrock Land

Risk-Adjusted Performance

Very Weak

Over the last 90 days Windrock Land Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Windrock Land is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

3M Company

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 14 (%) 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.

Pair Trading with Windrock Land and 3M

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

The idea behind Windrock Land Co and 3M Company 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.