Correlation Between 3M and Avantax
Can any of the company-specific risk be diversified away by investing in both 3M and Avantax 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 Avantax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Avantax, you can compare the effects of market volatilities on 3M and Avantax 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 Avantax. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Avantax.
Diversification Opportunities for 3M and Avantax
Very good diversification
The 3 months correlation between 3M and Avantax is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Avantax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantax 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 Avantax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantax has no effect on the direction of 3M i.e., 3M and Avantax go up and down completely randomly.
Pair Corralation between 3M and Avantax
Considering the 90-day investment horizon 3M is expected to generate 2.23 times less return on investment than Avantax. In addition to that, 3M is 1.21 times more volatile than Avantax. It trades about 0.08 of its total potential returns per unit of risk. Avantax is currently generating about 0.21 per unit of volatility. If you would invest 2,200 in Avantax on August 31, 2024 and sell it today you would earn a total of 421.00 from holding Avantax or generate 19.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 13.45% |
| Values | Daily Returns |
3M Company vs. Avantax
Performance |
| Timeline |
| 3M Company |
| Avantax |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
3M and Avantax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Avantax
The main advantage of trading using opposite 3M and Avantax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Avantax 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 Avantax will offset losses from the drop in Avantax's long position.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
| Avantax vs. Abrdn Emerging Markets | Avantax vs. DWS Municipal Income | Avantax vs. Blackrock Muni Intermediate | Avantax vs. Blackrock Muniyield |
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 Stocks Directory module to find actively traded stocks across global markets.
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