Correlation Between 3M and Moderna

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

Diversification Opportunities for 3M and Moderna

-0.22
  Correlation Coefficient

Very good diversification

The 3 months correlation between 3M and Moderna is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Moderna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderna 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 Moderna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderna has no effect on the direction of 3M i.e., 3M and Moderna go up and down completely randomly.

Pair Corralation between 3M and Moderna

Considering the 90-day investment horizon 3M Company is expected to generate 0.35 times more return on investment than Moderna. However, 3M Company is 2.85 times less risky than Moderna. It trades about 0.41 of its potential returns per unit of risk. Moderna is currently generating about 0.09 per unit of risk. If you would invest  12,901  in 3M Company on May 10, 2022 and sell it today you would earn a total of  1,840  from holding 3M Company or generate 14.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

3M Company  vs.  Moderna

 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 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

Moderna 
Moderna Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Moderna are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Moderna sustained solid returns over the last few months and may actually be approaching a breakup point.

Moderna Price Channel

3M and Moderna Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 3M and Moderna

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

Moderna

Pair trading matchups for Moderna

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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