Correlation Between 3M and Vast Renewables
Can any of the company-specific risk be diversified away by investing in both 3M and Vast Renewables 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 Vast Renewables into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Vast Renewables Limited, you can compare the effects of market volatilities on 3M and Vast Renewables 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 Vast Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Vast Renewables.
Diversification Opportunities for 3M and Vast Renewables
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 3M and Vast is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Vast Renewables Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vast Renewables 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 Vast Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vast Renewables has no effect on the direction of 3M i.e., 3M and Vast Renewables go up and down completely randomly.
Pair Corralation between 3M and Vast Renewables
Considering the 90-day investment horizon 3M Company is expected to under-perform the Vast Renewables. But the stock apears to be less risky and, when comparing its historical volatility, 3M Company is 18.02 times less risky than Vast Renewables. The stock trades about -0.01 of its potential returns per unit of risk. The Vast Renewables Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 122.00 in Vast Renewables Limited on August 30, 2024 and sell it today you would earn a total of 85.00 from holding Vast Renewables Limited or generate 69.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
3M Company vs. Vast Renewables Limited
Performance |
| Timeline |
| 3M Company |
| Vast Renewables |
3M and Vast Renewables Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Vast Renewables
The main advantage of trading using opposite 3M and Vast Renewables positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Vast Renewables 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 Vast Renewables will offset losses from the drop in Vast Renewables' long position.The idea behind 3M Company and Vast Renewables Limited 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.| Vast Renewables vs. Dominion Energy | Vast Renewables vs. Consolidated Edison | Vast Renewables vs. Eversource Energy | Vast Renewables vs. FirstEnergy |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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