Correlation Between 3M and Cisco Systems
Can any of the company-specific risk be diversified away by investing in both 3M and Cisco Systems 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 Cisco Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Cisco Systems, you can compare the effects of market volatilities on 3M and Cisco Systems 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 Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Cisco Systems.
Diversification Opportunities for 3M and Cisco Systems
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between 3M and Cisco is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems 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 Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of 3M i.e., 3M and Cisco Systems go up and down completely randomly.
Pair Corralation between 3M and Cisco Systems
Considering the 90-day investment horizon 3M Company is expected to generate 1.89 times more return on investment than Cisco Systems. However, 3M is 1.89 times more volatile than Cisco Systems. It trades about 0.1 of its potential returns per unit of risk. Cisco Systems is currently generating about 0.09 per unit of risk. If you would invest 7,961 in 3M Company on August 24, 2024 and sell it today you would earn a total of 4,790 from holding 3M Company or generate 60.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
3M Company vs. Cisco Systems
Performance |
| Timeline |
| 3M Company |
| Cisco Systems |
3M and Cisco Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Cisco Systems
The main advantage of trading using opposite 3M and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Cisco Systems 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 Cisco Systems will offset losses from the drop in Cisco Systems' long position.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
| Cisco Systems vs. Eshallgo Class A | Cisco Systems vs. Amtech Systems | Cisco Systems vs. Gold Fields Ltd | Cisco Systems vs. Aegean Airlines SA |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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