Correlation Between 3M and Healthequity

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

Diversification Opportunities for 3M and Healthequity

-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between 3M and Healthequity is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Healthequity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthequity 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 Healthequity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthequity has no effect on the direction of 3M i.e., 3M and Healthequity go up and down completely randomly.

Pair Corralation between 3M and Healthequity

Considering the 90-day investment horizon 3M Company is expected to under-perform the Healthequity. In addition to that, 3M is 1.25 times more volatile than Healthequity. It trades about -0.25 of its total potential returns per unit of risk. Healthequity is currently generating about 0.28 per unit of volatility. If you would invest  5,817  in Healthequity on June 29, 2022 and sell it today you would earn a total of  1,249  from holding Healthequity or generate 21.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

3M Company  vs.  Healthequity

 Performance (%) 
       Timeline  
3M Company 
3M Performance
0 of 100
Over the last 90 days 3M Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's primary indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

3M Price Channel

Healthequity 
Healthequity Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Healthequity are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Healthequity may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Healthequity Price Channel

3M and Healthequity Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 3M and Healthequity

The main advantage of trading using opposite 3M and Healthequity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Healthequity 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 Healthequity will offset losses from the drop in Healthequity's long position.
3M vs. Clearwater Paper Corp
The idea behind 3M Company and Healthequity 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.
Healthequity vs. Clearwater Paper Corp
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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