Correlation Between 3M and Vanguard
Can any of the company-specific risk be diversified away by investing in both 3M and Vanguard 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 Vanguard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Vanguard SP Small Cap, you can compare the effects of market volatilities on 3M and Vanguard 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 Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Vanguard.
Diversification Opportunities for 3M and Vanguard
Very poor diversification
The 3 months correlation between 3M and Vanguard is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Vanguard SP Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP Small 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 Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP Small has no effect on the direction of 3M i.e., 3M and Vanguard go up and down completely randomly.
Pair Corralation between 3M and Vanguard
Considering the 90-day investment horizon 3M is expected to generate 2.11 times less return on investment than Vanguard. In addition to that, 3M is 1.14 times more volatile than Vanguard SP Small Cap. It trades about 0.08 of its total potential returns per unit of risk. Vanguard SP Small Cap is currently generating about 0.19 per unit of volatility. If you would invest 8,149 in Vanguard SP Small Cap on June 2, 2025 and sell it today you would earn a total of 1,283 from holding Vanguard SP Small Cap or generate 15.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
3M Company vs. Vanguard SP Small Cap
Performance |
| Timeline |
| 3M Company |
| Vanguard SP Small |
3M and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Vanguard
The main advantage of trading using opposite 3M and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Vanguard 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 Vanguard will offset losses from the drop in Vanguard's long position.| 3M vs. Skycorp Solar Group | 3M vs. Elong Power Holding | 3M vs. Westport Fuel Systems | 3M vs. Falcons Beyond Global, |
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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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