Correlation Between 3M and IPath Bloomberg
Can any of the company-specific risk be diversified away by investing in both 3M and IPath Bloomberg 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 IPath Bloomberg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and IPath Bloomberg Cotton, you can compare the effects of market volatilities on 3M and IPath Bloomberg 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 IPath Bloomberg. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and IPath Bloomberg.
Diversification Opportunities for 3M and IPath Bloomberg
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 3M and IPath is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and IPath Bloomberg Cotton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPath Bloomberg Cotton 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 IPath Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPath Bloomberg Cotton has no effect on the direction of 3M i.e., 3M and IPath Bloomberg go up and down completely randomly.
Pair Corralation between 3M and IPath Bloomberg
Considering the 90-day investment horizon 3M Company is expected to generate 3.4 times more return on investment than IPath Bloomberg. However, 3M is 3.4 times more volatile than IPath Bloomberg Cotton. It trades about 0.04 of its potential returns per unit of risk. IPath Bloomberg Cotton is currently generating about 0.05 per unit of risk. If you would invest 9,266 in 3M Company on September 12, 2024 and sell it today you would earn a total of 3,711 from holding 3M Company or generate 40.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 29.29% |
| Values | Daily Returns |
3M Company vs. IPath Bloomberg Cotton
Performance |
| Timeline |
| 3M Company |
| IPath Bloomberg Cotton |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
3M and IPath Bloomberg Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and IPath Bloomberg
The main advantage of trading using opposite 3M and IPath Bloomberg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, IPath Bloomberg 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 IPath Bloomberg will offset losses from the drop in IPath Bloomberg's long position.| 3M vs. Victory Integrity Smallmid Cap | 3M vs. Hilton Worldwide Holdings | 3M vs. NVIDIA | 3M 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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