Correlation Between 3M and Clearwater Paper

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

Diversification Opportunities for 3M and Clearwater Paper

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between 3M and Clearwater is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Clearwater Paper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearwater Paper 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 Clearwater Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearwater Paper Corp has no effect on the direction of 3M i.e., 3M and Clearwater Paper go up and down completely randomly.

Pair Corralation between 3M and Clearwater Paper

Considering the 90-day investment horizon 3M Company is expected to generate 0.34 times more return on investment than Clearwater Paper. However, 3M Company is 2.96 times less risky than Clearwater Paper. It trades about 0.1 of its potential returns per unit of risk. Clearwater Paper Corp is currently generating about -0.08 per unit of risk. If you would invest  12,513  in 3M Company on August 29, 2022 and sell it today you would earn a total of  391.00  from holding 3M Company or generate 3.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

3M Company  vs.  Clearwater Paper Corp

 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 new stock price chaos, may contribute to medium-term losses for the stakeholders.

3M Price Channel

Clearwater Paper Corp 
Clearwater Performance
0 of 100
Over the last 90 days Clearwater Paper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Clearwater Price Channel

3M and Clearwater Paper Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 3M and Clearwater Paper

The main advantage of trading using opposite 3M and Clearwater Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Clearwater Paper 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 Clearwater Paper will offset losses from the drop in Clearwater Paper's long position.
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The idea behind 3M Company and Clearwater Paper 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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