Correlation Between 3M and AGNC Investment

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

Diversification Opportunities for 3M and AGNC Investment

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between 3M and AGNC Investment is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and AGNC Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGNC Investment Corp 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 AGNC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGNC Investment Corp has no effect on the direction of 3M i.e., 3M and AGNC Investment go up and down completely randomly.

Pair Corralation between 3M and AGNC Investment

Considering the 90-day investment horizon 3M is expected to generate 6.24 times less return on investment than AGNC Investment. But when comparing it to its historical volatility, 3M Company is 1.69 times less risky than AGNC Investment. It trades about 0.08 of its potential returns per unit of risk. AGNC Investment Corp is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  834.00  in AGNC Investment Corp on September 8, 2022 and sell it today you would earn a total of  149.00  from holding AGNC Investment Corp or generate 17.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

3M Company  vs.  AGNC Investment Corp

 Performance (%) 
       Timeline  
3M Company 
3M Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, 3M may actually be approaching a critical reversion point that can send shares even higher in January 2023.

3M Price Channel

AGNC Investment Corp 
AGNC Investment Performance
0 of 100
Over the last 90 days AGNC Investment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

AGNC Investment Price Channel

3M and AGNC Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 3M and AGNC Investment

The main advantage of trading using opposite 3M and AGNC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, AGNC Investment 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 AGNC Investment will offset losses from the drop in AGNC Investment's long position.
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The idea behind 3M Company and AGNC Investment Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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