Correlation Between 3M and Iconic Sports
Can any of the company-specific risk be diversified away by investing in both 3M and Iconic Sports 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 Iconic Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Iconic Sports Acquisition, you can compare the effects of market volatilities on 3M and Iconic Sports 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 Iconic Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Iconic Sports.
Diversification Opportunities for 3M and Iconic Sports
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 3M and Iconic is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Iconic Sports Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iconic Sports Acquisition 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 Iconic Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iconic Sports Acquisition has no effect on the direction of 3M i.e., 3M and Iconic Sports go up and down completely randomly.
Pair Corralation between 3M and Iconic Sports
Considering the 90-day investment horizon 3M Company is expected to generate 23.78 times more return on investment than Iconic Sports. However, 3M is 23.78 times more volatile than Iconic Sports Acquisition. It trades about 0.04 of its potential returns per unit of risk. Iconic Sports Acquisition is currently generating about 0.29 per unit of risk. If you would invest 9,583 in 3M Company on August 30, 2024 and sell it today you would earn a total of 3,665 from holding 3M Company or generate 38.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 31.11% |
| Values | Daily Returns |
3M Company vs. Iconic Sports Acquisition
Performance |
| Timeline |
| 3M Company |
| Iconic Sports Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
3M and Iconic Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Iconic Sports
The main advantage of trading using opposite 3M and Iconic Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Iconic Sports 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 Iconic Sports will offset losses from the drop in Iconic Sports' long position.The idea behind 3M Company and Iconic Sports Acquisition 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.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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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