Correlation Between Target 2030 and 3M
Can any of the company-specific risk be diversified away by investing in both Target 2030 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 Target 2030 and 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target 2030 Fund and 3M Company, you can compare the effects of market volatilities on Target 2030 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 Target 2030 with a short position of 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target 2030 and 3M.
Diversification Opportunities for Target 2030 and 3M
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Target and 3M is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Target 2030 Fund and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and Target 2030 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 Target 2030 Fund 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 Target 2030 i.e., Target 2030 and 3M go up and down completely randomly.
Pair Corralation between Target 2030 and 3M
Assuming the 90 days horizon Target 2030 is expected to generate 6.95 times less return on investment than 3M. But when comparing it to its historical volatility, Target 2030 Fund is 3.3 times less risky than 3M. It trades about 0.27 of its potential returns per unit of risk. 3M Company is currently generating about 0.57 of returns per unit of risk over similar time horizon. 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 |
Target 2030 Fund vs. 3M Company
Performance |
| Timeline |
| Target 2030 Fund |
| 3M Company |
Target 2030 and 3M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target 2030 and 3M
The main advantage of trading using opposite Target 2030 and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target 2030 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.| Target 2030 vs. Touchstone Ultra Short | Target 2030 vs. Nuveen Short Term | Target 2030 vs. Siit Ultra Short | Target 2030 vs. Fidelity Flex Servative |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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