Correlation Between 3M and McEwen Mining
Can any of the company-specific risk be diversified away by investing in both 3M and McEwen Mining 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 McEwen Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and McEwen Mining, you can compare the effects of market volatilities on 3M and McEwen Mining 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 McEwen Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and McEwen Mining.
Diversification Opportunities for 3M and McEwen Mining
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 3M and McEwen is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and McEwen Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McEwen Mining 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 McEwen Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McEwen Mining has no effect on the direction of 3M i.e., 3M and McEwen Mining go up and down completely randomly.
Pair Corralation between 3M and McEwen Mining
Assuming the 90 days trading horizon 3M is expected to generate 4.57 times less return on investment than McEwen Mining. But when comparing it to its historical volatility, 3M Company is 2.48 times less risky than McEwen Mining. It trades about 0.03 of its potential returns per unit of risk. McEwen Mining is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 7,500 in McEwen Mining on September 20, 2024 and sell it today you would earn a total of 12,300 from holding McEwen Mining or generate 164.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
3M Company vs. McEwen Mining
Performance |
| Timeline |
| 3M Company |
| McEwen Mining |
3M and McEwen Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and McEwen Mining
The main advantage of trading using opposite 3M and McEwen Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, McEwen Mining 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 McEwen Mining will offset losses from the drop in McEwen Mining's long position.The idea behind 3M Company and McEwen Mining 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.| McEwen Mining vs. Cognizant Technology Solutions | McEwen Mining vs. Verizon Communications | McEwen Mining vs. Southern Copper | McEwen Mining vs. United Airlines Holdings |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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