Correlation Between 3M and Wahed FTSE
Can any of the company-specific risk be diversified away by investing in both 3M and Wahed FTSE 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 Wahed FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Wahed FTSE USA, you can compare the effects of market volatilities on 3M and Wahed FTSE 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 Wahed FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Wahed FTSE.
Diversification Opportunities for 3M and Wahed FTSE
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 3M and Wahed is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Wahed FTSE USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wahed FTSE USA 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 Wahed FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wahed FTSE USA has no effect on the direction of 3M i.e., 3M and Wahed FTSE go up and down completely randomly.
Pair Corralation between 3M and Wahed FTSE
Considering the 90-day investment horizon 3M is expected to generate 1.17 times less return on investment than Wahed FTSE. In addition to that, 3M is 2.33 times more volatile than Wahed FTSE USA. It trades about 0.04 of its total potential returns per unit of risk. Wahed FTSE USA is currently generating about 0.1 per unit of volatility. If you would invest 3,891 in Wahed FTSE USA on January 26, 2024 and sell it today you would earn a total of 813.00 from holding Wahed FTSE USA or generate 20.89% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
3M Company vs. Wahed FTSE USA
Performance |
Timeline |
3M Company |
Wahed FTSE USA |
3M and Wahed FTSE Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with 3M and Wahed FTSE
The main advantage of trading using opposite 3M and Wahed FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Wahed FTSE 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 Wahed FTSE will offset losses from the drop in Wahed FTSE's long position.3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
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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 the Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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