Correlation Between 3M and Ayala
Can any of the company-specific risk be diversified away by investing in both 3M and Ayala 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 Ayala into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Ayala, you can compare the effects of market volatilities on 3M and Ayala 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 Ayala. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Ayala.
Diversification Opportunities for 3M and Ayala
Significant diversification
The 3 months correlation between 3M and Ayala is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Ayala in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala 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 Ayala. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala has no effect on the direction of 3M i.e., 3M and Ayala go up and down completely randomly.
Pair Corralation between 3M and Ayala
Considering the 90-day investment horizon 3M is expected to generate 2.77 times less return on investment than Ayala. But when comparing it to its historical volatility, 3M Company is 1.7 times less risky than Ayala. It trades about 0.13 of its potential returns per unit of risk. Ayala is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,005 in Ayala on September 1, 2024 and sell it today you would earn a total of 130.00 from holding Ayala or generate 12.94% 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. Ayala
Performance |
| Timeline |
| 3M Company |
| Ayala |
3M and Ayala Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Ayala
The main advantage of trading using opposite 3M and Ayala positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Ayala 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 Ayala will offset losses from the drop in Ayala's long position.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
| Ayala vs. Harmony Gold Mining | Ayala vs. Air Products and | Ayala vs. Minerals Technologies | Ayala vs. Codexis |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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