Correlation Between 3M and Windtree Therapeutics

Can any of the company-specific risk be diversified away by investing in both 3M and Windtree Therapeutics 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 Windtree Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 3M Company and Windtree Therapeutics, you can compare the effects of market volatilities on 3M and Windtree Therapeutics 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 Windtree Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Windtree Therapeutics.

Diversification Opportunities for 3M and Windtree Therapeutics

0.0

Correlation Coefficient

3M  Windtree Therapeutics

Pay attention - limited upside

The 3 months correlation between 3M and Windtree is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Windtree Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Windtree Therapeutics 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 Windtree Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Windtree Therapeutics has no effect on the direction of 3M i.e., 3M and Windtree Therapeutics go up and down completely randomly.

Pair Corralation between 3M and Windtree Therapeutics

If you would invest  7,758  in 3M Company on February 11, 2024 and sell it today you would earn a total of  2,135  from holding 3M Company or generate 27.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

3M Company  vs.  Windtree Therapeutics

3M Company

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, 3M displayed solid returns over the last few months and may actually be approaching a breakup point.

Windtree Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Windtree Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Windtree Therapeutics is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with 3M and Windtree Therapeutics

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

The idea behind 3M Company and Windtree Therapeutics 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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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.