Correlation Between 3M and Alaska Power
Can any of the company-specific risk be diversified away by investing in both 3M and Alaska Power 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 Alaska Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Alaska Power Telephone, you can compare the effects of market volatilities on 3M and Alaska Power 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 Alaska Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Alaska Power.
Diversification Opportunities for 3M and Alaska Power
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between 3M and Alaska is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Alaska Power Telephone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Power Telephone 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 Alaska Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Power Telephone has no effect on the direction of 3M i.e., 3M and Alaska Power go up and down completely randomly.
Pair Corralation between 3M and Alaska Power
Considering the 90-day investment horizon 3M Company is expected to generate 3.31 times more return on investment than Alaska Power. However, 3M is 3.31 times more volatile than Alaska Power Telephone. It trades about 0.4 of its potential returns per unit of risk. Alaska Power Telephone is currently generating about 0.21 per unit of risk. If you would invest 12,928 in 3M Company on October 21, 2024 and sell it today you would earn a total of 1,175 from holding 3M Company or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
3M Company vs. Alaska Power Telephone
Performance |
| Timeline |
| 3M Company |
| Alaska Power Telephone |
3M and Alaska Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Alaska Power
The main advantage of trading using opposite 3M and Alaska Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Alaska Power 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 Alaska Power will offset losses from the drop in Alaska Power's long position.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
| Alaska Power vs. Alliance Recovery | Alaska Power vs. Ayala | Alaska Power vs. Ayala Corp ADR | Alaska Power vs. Alliance Global Group |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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