Correlation Between 3M and Earthstone Energy
Can any of the company-specific risk be diversified away by investing in both 3M and Earthstone Energy 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 Earthstone Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Earthstone Energy, you can compare the effects of market volatilities on 3M and Earthstone Energy 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 Earthstone Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Earthstone Energy.
Diversification Opportunities for 3M and Earthstone Energy
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 3M and Earthstone is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Earthstone Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Earthstone Energy 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 Earthstone Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Earthstone Energy has no effect on the direction of 3M i.e., 3M and Earthstone Energy go up and down completely randomly.
Pair Corralation between 3M and Earthstone Energy
If you would invest 12,960 in 3M Company on August 28, 2024 and sell it today you would earn a total of 72.00 from holding 3M Company or generate 0.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
3M Company vs. Earthstone Energy
Performance |
| Timeline |
| 3M Company |
| Earthstone Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
3M and Earthstone Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Earthstone Energy
The main advantage of trading using opposite 3M and Earthstone Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Earthstone Energy 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 Earthstone Energy will offset losses from the drop in Earthstone Energy's long position.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
| Earthstone Energy vs. Vital Energy | Earthstone Energy vs. Comstock Resources | Earthstone Energy vs. Magnolia Oil Gas | Earthstone Energy vs. Obsidian Energy |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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