Correlation Between 3M and Advisors Asset
Can any of the company-specific risk be diversified away by investing in both 3M and Advisors Asset 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 Advisors Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Advisors Asset Management, you can compare the effects of market volatilities on 3M and Advisors Asset 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 Advisors Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Advisors Asset.
Diversification Opportunities for 3M and Advisors Asset
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between 3M and Advisors is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Advisors Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advisors Asset Management 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 Advisors Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advisors Asset Management has no effect on the direction of 3M i.e., 3M and Advisors Asset go up and down completely randomly.
Pair Corralation between 3M and Advisors Asset
Considering the 90-day investment horizon 3M Company is expected to generate 2.95 times more return on investment than Advisors Asset. However, 3M is 2.95 times more volatile than Advisors Asset Management. It trades about 0.09 of its potential returns per unit of risk. Advisors Asset Management is currently generating about 0.07 per unit of risk. If you would invest 8,555 in 3M Company on September 12, 2024 and sell it today you would earn a total of 4,424 from holding 3M Company or generate 51.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 85.48% |
| Values | Daily Returns |
3M Company vs. Advisors Asset Management
Performance |
| Timeline |
| 3M Company |
| Advisors Asset Management |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
3M and Advisors Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Advisors Asset
The main advantage of trading using opposite 3M and Advisors Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Advisors Asset 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 Advisors Asset will offset losses from the drop in Advisors Asset's long position.| 3M vs. Vast Renewables Limited | 3M vs. 1847 Holdings LLC | 3M vs. Falcons Beyond Global, | 3M vs. Brookfield Business Partners |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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