Correlation Between Roche Holding and 3M
Can any of the company-specific risk be diversified away by investing in both Roche Holding and 3M 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 Roche Holding and 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Roche Holding AG and 3M Company, you can compare the effects of market volatilities on Roche Holding and 3M 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 Roche Holding with a short position of 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roche Holding and 3M.
Diversification Opportunities for Roche Holding and 3M
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Roche and 3M is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Roche Holding AG and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and Roche Holding 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 Roche Holding AG are associated (or correlated) with 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of Roche Holding i.e., Roche Holding and 3M go up and down completely randomly.
Pair Corralation between Roche Holding and 3M
Assuming the 90 days horizon Roche Holding is expected to generate 1.7 times less return on investment than 3M. In addition to that, Roche Holding is 1.13 times more volatile than 3M Company. It trades about 0.29 of its total potential returns per unit of risk. 3M Company is currently generating about 0.57 per unit of volatility. If you would invest 12,970 in 3M Company on November 3, 2024 and sell it today you would earn a total of 2,250 from holding 3M Company or generate 17.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Roche Holding AG vs. 3M Company
Performance |
| Timeline |
| Roche Holding AG |
| 3M Company |
Roche Holding and 3M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Roche Holding and 3M
The main advantage of trading using opposite Roche Holding and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roche Holding position performs unexpectedly, 3M 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 3M will offset losses from the drop in 3M's long position.| Roche Holding vs. Novartis AG | Roche Holding vs. AstraZeneca PLC | Roche Holding vs. Roche Holding Ltd | Roche Holding vs. Sanofi ADR |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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