Correlation Between 3M and SPDR Galaxy
Can any of the company-specific risk be diversified away by investing in both 3M and SPDR Galaxy 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 SPDR Galaxy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and SPDR Galaxy Transformative, you can compare the effects of market volatilities on 3M and SPDR Galaxy 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 SPDR Galaxy. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and SPDR Galaxy.
Diversification Opportunities for 3M and SPDR Galaxy
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 3M and SPDR is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and SPDR Galaxy Transformative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Galaxy Transfor 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 SPDR Galaxy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Galaxy Transfor has no effect on the direction of 3M i.e., 3M and SPDR Galaxy go up and down completely randomly.
Pair Corralation between 3M and SPDR Galaxy
Considering the 90-day investment horizon 3M Company is expected to generate 0.57 times more return on investment than SPDR Galaxy. However, 3M Company is 1.76 times less risky than SPDR Galaxy. It trades about 0.1 of its potential returns per unit of risk. SPDR Galaxy Transformative is currently generating about 0.05 per unit of risk. If you would invest 12,960 in 3M Company on August 29, 2024 and sell it today you would earn a total of 436.00 from holding 3M Company or generate 3.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
3M Company vs. SPDR Galaxy Transformative
Performance |
| Timeline |
| 3M Company |
| SPDR Galaxy Transfor |
3M and SPDR Galaxy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and SPDR Galaxy
The main advantage of trading using opposite 3M and SPDR Galaxy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, SPDR Galaxy 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 SPDR Galaxy will offset losses from the drop in SPDR Galaxy's long position.The idea behind 3M Company and SPDR Galaxy Transformative 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.| SPDR Galaxy vs. Freedom Day Dividend | SPDR Galaxy vs. Franklin Templeton ETF | SPDR Galaxy vs. iShares MSCI China | SPDR Galaxy vs. Tidal Trust II |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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