Correlation Between 3M and IShares ESG
Can any of the company-specific risk be diversified away by investing in both 3M and IShares ESG 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 IShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and iShares ESG Advanced, you can compare the effects of market volatilities on 3M and IShares ESG 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 IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and IShares ESG.
Diversification Opportunities for 3M and IShares ESG
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 3M and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and iShares ESG Advanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Advanced 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 IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Advanced has no effect on the direction of 3M i.e., 3M and IShares ESG go up and down completely randomly.
Pair Corralation between 3M and IShares ESG
Considering the 90-day investment horizon 3M Company is expected to generate 1.92 times more return on investment than IShares ESG. However, 3M is 1.92 times more volatile than iShares ESG Advanced. It trades about -0.02 of its potential returns per unit of risk. iShares ESG Advanced is currently generating about -0.23 per unit of risk. If you would invest 12,960 in 3M Company on August 27, 2024 and sell it today you would lose (118.00) from holding 3M Company or give up 0.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
3M Company vs. iShares ESG Advanced
Performance |
| Timeline |
| 3M Company |
| iShares ESG Advanced |
3M and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and IShares ESG
The main advantage of trading using opposite 3M and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, IShares ESG 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 IShares ESG will offset losses from the drop in IShares ESG's long position.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
| IShares ESG vs. iShares ESG Advanced | IShares ESG vs. iShares ESG Advanced | IShares ESG vs. iShares ESG MSCI | IShares ESG vs. iShares ESG Aware |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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