Correlation Between 3M and FDCTech
Can any of the company-specific risk be diversified away by investing in both 3M and FDCTech 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 FDCTech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and FDCTech, you can compare the effects of market volatilities on 3M and FDCTech 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 FDCTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and FDCTech.
Diversification Opportunities for 3M and FDCTech
Very good diversification
The 3 months correlation between 3M and FDCTech is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and FDCTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDCTech 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 FDCTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDCTech has no effect on the direction of 3M i.e., 3M and FDCTech go up and down completely randomly.
Pair Corralation between 3M and FDCTech
Considering the 90-day investment horizon 3M is expected to generate 57.74 times less return on investment than FDCTech. But when comparing it to its historical volatility, 3M Company is 32.45 times less risky than FDCTech. It trades about 0.04 of its potential returns per unit of risk. FDCTech is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1.20 in FDCTech on September 3, 2024 and sell it today you would lose (0.70) from holding FDCTech or give up 58.33% 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. FDCTech
Performance |
| Timeline |
| 3M Company |
| FDCTech |
3M and FDCTech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and FDCTech
The main advantage of trading using opposite 3M and FDCTech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, FDCTech 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 FDCTech will offset losses from the drop in FDCTech's long position.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
| FDCTech vs. First Tractor | FDCTech vs. Ag Growth International | FDCTech vs. AmeraMex International | FDCTech vs. Arts Way Manufacturing Co |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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