Correlation Between 3M and Bellus Health

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

Diversification Opportunities for 3M and Bellus Health

0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between 3M and Bellus is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Bellus Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bellus Health 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 Bellus Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bellus Health has no effect on the direction of 3M i.e., 3M and Bellus Health go up and down completely randomly.

Pair Corralation between 3M and Bellus Health

Considering the 90-day investment horizon 3M is expected to generate 1.87 times less return on investment than Bellus Health. But when comparing it to its historical volatility, 3M Company is 2.42 times less risky than Bellus Health. It trades about 0.32 of its potential returns per unit of risk. Bellus Health is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  941.00  in Bellus Health on May 20, 2022 and sell it today you would earn a total of  202.00  from holding Bellus Health or generate 21.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

3M Company  vs.  Bellus Health

 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

Bellus Health 
Bellus Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bellus Health are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Bellus Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bellus Price Channel

3M and Bellus Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 3M and Bellus Health

The main advantage of trading using opposite 3M and Bellus Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Bellus Health 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 Bellus Health will offset losses from the drop in Bellus Health's long position.

3M Company

Pair trading matchups for 3M

The idea behind 3M Company and Bellus Health 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.

Bellus Health

Pair trading matchups for Bellus Health

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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