Correlation Between Bosch and 3M India

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

Diversification Opportunities for Bosch and 3M India

-0.17
  Correlation Coefficient

Good diversification

The 3 months correlation between Bosch and 3MINDIA is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Bosch Limited and 3M India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M India Limited and Bosch 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 Bosch Limited are associated (or correlated) with 3M India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M India Limited has no effect on the direction of Bosch i.e., Bosch and 3M India go up and down completely randomly.

Pair Corralation between Bosch and 3M India

Assuming the 90 days trading horizon Bosch Limited is expected to generate 1.14 times more return on investment than 3M India. However, Bosch is 1.14 times more volatile than 3M India Limited. It trades about 0.05 of its potential returns per unit of risk. 3M India Limited is currently generating about -0.12 per unit of risk. If you would invest  3,281,440  in Bosch Limited on August 26, 2024 and sell it today you would earn a total of  150,315  from holding Bosch Limited or generate 4.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.44%
ValuesDaily Returns

Bosch Limited  vs.  3M India Limited

 Performance 
       Timeline  
Bosch Limited 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Bosch Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Bosch is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
3M India Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days 3M India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Bosch and 3M India Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bosch and 3M India

The main advantage of trading using opposite Bosch and 3M India positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bosch position performs unexpectedly, 3M India 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 3M India will offset losses from the drop in 3M India's long position.
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The idea behind Bosch Limited and 3M India Limited 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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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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