Correlation Between 3M and Diguang Intl
Can any of the company-specific risk be diversified away by investing in both 3M and Diguang Intl 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 Diguang Intl into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Diguang Intl Dev, you can compare the effects of market volatilities on 3M and Diguang Intl 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 Diguang Intl. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Diguang Intl.
Diversification Opportunities for 3M and Diguang Intl
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 3M and Diguang is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Diguang Intl Dev in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diguang Intl Dev 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 Diguang Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diguang Intl Dev has no effect on the direction of 3M i.e., 3M and Diguang Intl go up and down completely randomly.
Pair Corralation between 3M and Diguang Intl
Considering the 90-day investment horizon 3M is expected to generate 90.12 times less return on investment than Diguang Intl. But when comparing it to its historical volatility, 3M Company is 42.8 times less risky than Diguang Intl. It trades about 0.04 of its potential returns per unit of risk. Diguang Intl Dev is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 0.40 in Diguang Intl Dev on September 2, 2024 and sell it today you would lose (0.31) from holding Diguang Intl Dev or give up 77.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
3M Company vs. Diguang Intl Dev
Performance |
| Timeline |
| 3M Company |
| Diguang Intl Dev |
3M and Diguang Intl Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Diguang Intl
The main advantage of trading using opposite 3M and Diguang Intl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Diguang Intl 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 Diguang Intl will offset losses from the drop in Diguang Intl's long position.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
| Diguang Intl vs. Contagious Gaming | Diguang Intl vs. The Coca Cola | Diguang Intl vs. Brandywine Realty Trust | Diguang Intl vs. Barrick Gold Corp |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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