Correlation Between 3M and A SPAC

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

Diversification Opportunities for 3M and A SPAC

-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between 3M and ASCAR is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and A SPAC I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A SPAC I 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 A SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A SPAC I has no effect on the direction of 3M i.e., 3M and A SPAC go up and down completely randomly.

Pair Corralation between 3M and A SPAC

If you would invest  8,555  in 3M Company on September 12, 2024 and sell it today you would earn a total of  4,422  from holding 3M Company or generate 51.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy0.4%
ValuesDaily Returns

3M Company  vs.  A SPAC I

 Performance 
       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 current stock price disarray, may contribute to short-term losses for the investors.
A SPAC I 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days A SPAC I has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, A SPAC is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

3M and A SPAC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 3M and A SPAC

The main advantage of trading using opposite 3M and A SPAC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, A SPAC 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 A SPAC will offset losses from the drop in A SPAC's long position.
The idea behind 3M Company and A SPAC I 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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