Correlation Between 3M and Brp
Can any of the company-specific risk be diversified away by investing in both 3M and Brp 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 Brp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Brp Group, you can compare the effects of market volatilities on 3M and Brp 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 Brp. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Brp.
Diversification Opportunities for 3M and Brp
Excellent diversification
The 3 months correlation between 3M and Brp is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Brp Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brp Group 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 Brp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brp Group has no effect on the direction of 3M i.e., 3M and Brp go up and down completely randomly.
Pair Corralation between 3M and Brp
Considering the 90-day investment horizon 3M Company is expected to generate 0.76 times more return on investment than Brp. However, 3M Company is 1.32 times less risky than Brp. It trades about 0.04 of its potential returns per unit of risk. Brp Group is currently generating about 0.0 per unit of risk. If you would invest 9,628 in 3M Company on August 28, 2024 and sell it today you would earn a total of 3,404 from holding 3M Company or generate 35.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 31.72% |
| Values | Daily Returns |
3M Company vs. Brp Group
Performance |
| Timeline |
| 3M Company |
| Brp Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
3M and Brp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Brp
The main advantage of trading using opposite 3M and Brp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Brp 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 Brp will offset losses from the drop in Brp's long position.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
| Brp vs. Arthur J Gallagher | Brp vs. Marsh McLennan Companies | Brp vs. Willis Towers Watson | Brp vs. Erie Indemnity |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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