Correlation Between 3M and Exchange Listed
Can any of the company-specific risk be diversified away by investing in both 3M and Exchange Listed 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 Exchange Listed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Exchange Listed Funds, you can compare the effects of market volatilities on 3M and Exchange Listed 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 Exchange Listed. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Exchange Listed.
Diversification Opportunities for 3M and Exchange Listed
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 3M and Exchange is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Exchange Listed Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Listed Funds 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 Exchange Listed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Listed Funds has no effect on the direction of 3M i.e., 3M and Exchange Listed go up and down completely randomly.
Pair Corralation between 3M and Exchange Listed
Considering the 90-day investment horizon 3M Company is expected to generate 2.36 times more return on investment than Exchange Listed. However, 3M is 2.36 times more volatile than Exchange Listed Funds. It trades about 0.04 of its potential returns per unit of risk. Exchange Listed Funds is currently generating about 0.04 per unit of risk. If you would invest 9,700 in 3M Company on September 3, 2024 and sell it today you would earn a total of 3,589 from holding 3M Company or generate 37.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 35.76% |
| Values | Daily Returns |
3M Company vs. Exchange Listed Funds
Performance |
| Timeline |
| 3M Company |
| Exchange Listed Funds |
3M and Exchange Listed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Exchange Listed
The main advantage of trading using opposite 3M and Exchange Listed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Exchange Listed 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 Exchange Listed will offset losses from the drop in Exchange Listed's long position.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
| Exchange Listed vs. BrandywineGLOBAL Dynamic | Exchange Listed vs. First Trust Growth | Exchange Listed vs. Invesco NASDAQ Future | Exchange Listed vs. Burney Factor Rotation |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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