Correlation Between 3M and Boeing
Can any of the company-specific risk be diversified away by investing in both 3M and Boeing 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 Boeing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and The Boeing, you can compare the effects of market volatilities on 3M and Boeing 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 Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Boeing.
Diversification Opportunities for 3M and Boeing
Significant diversification
The 3 months correlation between 3M and Boeing is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of 3M i.e., 3M and Boeing go up and down completely randomly.
Pair Corralation between 3M and Boeing
Considering the 90-day investment horizon 3M Company is expected to under-perform the Boeing. But the stock apears to be less risky and, when comparing its historical volatility, 3M Company is 1.86 times less risky than Boeing. The stock trades about -0.07 of its potential returns per unit of risk. The The Boeing is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 14,896 in The Boeing on September 12, 2024 and sell it today you would earn a total of 1,514 from holding The Boeing or generate 10.16% 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. The Boeing
Performance |
| Timeline |
| 3M Company |
| Boeing |
3M and Boeing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Boeing
The main advantage of trading using opposite 3M and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Boeing 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 Boeing will offset losses from the drop in Boeing's long position.| 3M vs. Victory Integrity Smallmid Cap | 3M vs. Hilton Worldwide Holdings | 3M vs. NVIDIA | 3M vs. JPMorgan Chase Co |
| Boeing vs. Victory Integrity Smallmid Cap | Boeing vs. Hilton Worldwide Holdings | Boeing vs. NVIDIA | Boeing vs. JPMorgan Chase Co |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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