Correlation Between 3M and American Equity
Can any of the company-specific risk be diversified away by investing in both 3M and American Equity 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 American Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and American Equity Investment, you can compare the effects of market volatilities on 3M and American Equity 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 American Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and American Equity.
Diversification Opportunities for 3M and American Equity
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 3M and American is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and American Equity Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Equity Inve 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 American Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Equity Inve has no effect on the direction of 3M i.e., 3M and American Equity go up and down completely randomly.
Pair Corralation between 3M and American Equity
If you would invest 12,960 in 3M Company on August 28, 2024 and sell it today you would earn a total of 72.00 from holding 3M Company or generate 0.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
3M Company vs. American Equity Investment
Performance |
| Timeline |
| 3M Company |
| American Equity Inve |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
3M and American Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and American Equity
The main advantage of trading using opposite 3M and American Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, American Equity 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 American Equity will offset losses from the drop in American Equity's long position.| 3M vs. Vast Renewables Limited | 3M vs. 1847 Holdings LLC | 3M vs. Westport Fuel Systems | 3M vs. Brookfield Business Partners |
| American Equity vs. MetLife Preferred Stock | American Equity vs. Prudential Public Limited | American Equity vs. MetLife Preferred Stock | American Equity vs. Jackson Financial |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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