Correlation Between 3M and REAL ESTATE

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Can any of the company-specific risk be diversified away by investing in both 3M and REAL ESTATE 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 REAL ESTATE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and REAL ESTATE FUND, you can compare the effects of market volatilities on 3M and REAL ESTATE 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 REAL ESTATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and REAL ESTATE.

Diversification Opportunities for 3M and REAL ESTATE

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between 3M and ARREX is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and REAL ESTATE FUND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REAL ESTATE FUND 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 REAL ESTATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REAL ESTATE FUND has no effect on the direction of 3M i.e., 3M and REAL ESTATE go up and down completely randomly.

Pair Corralation between 3M and REAL ESTATE

Considering the 90-day investment horizon 3M Company is expected to under-perform the REAL ESTATE. In addition to that, 3M is 1.13 times more volatile than REAL ESTATE FUND. It trades about -0.03 of its total potential returns per unit of risk. REAL ESTATE FUND is currently generating about 0.02 per unit of volatility. If you would invest  2,303  in REAL ESTATE FUND on September 10, 2022 and sell it today you would earn a total of  288.00  from holding REAL ESTATE FUND or generate 12.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

3M Company  vs.  REAL ESTATE FUND

 Performance (%) 
       Timeline  
3M Company 
3M Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady primary indicators, 3M is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

3M Price Channel

REAL ESTATE FUND 
ARREX Performance
0 of 100
Over the last 90 days REAL ESTATE FUND has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

ARREX Price Channel

3M and REAL ESTATE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 3M and REAL ESTATE

The main advantage of trading using opposite 3M and REAL ESTATE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, REAL ESTATE 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 REAL ESTATE will offset losses from the drop in REAL ESTATE's long position.
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The idea behind 3M Company and REAL ESTATE FUND 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.
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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