Correlation Between 3M and National Health
Can any of the company-specific risk be diversified away by investing in both 3M and National Health 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 National Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and National Health Scan, you can compare the effects of market volatilities on 3M and National Health 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 National Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and National Health.
Diversification Opportunities for 3M and National Health
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between 3M and National is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and National Health Scan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Scan 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 National Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Health Scan has no effect on the direction of 3M i.e., 3M and National Health go up and down completely randomly.
Pair Corralation between 3M and National Health
Considering the 90-day investment horizon 3M Company is expected to under-perform the National Health. But the stock apears to be less risky and, when comparing its historical volatility, 3M Company is 19.42 times less risky than National Health. The stock trades about -0.05 of its potential returns per unit of risk. The National Health Scan is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2.00 in National Health Scan on September 13, 2024 and sell it today you would lose (0.40) from holding National Health Scan or give up 20.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
3M Company vs. National Health Scan
Performance |
| Timeline |
| 3M Company |
| National Health Scan |
3M and National Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and National Health
The main advantage of trading using opposite 3M and National Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, National Health 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 National Health will offset losses from the drop in National Health's long position.| 3M vs. Vast Renewables Limited | 3M vs. 1847 Holdings LLC | 3M vs. Westport Fuel Systems | 3M vs. Falcons Beyond Global, |
| National Health vs. Arca Continental SAB | National Health vs. Becle SA de | National Health vs. Aquagold International | National Health vs. Morningstar Unconstrained Allocation |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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