Correlation Between 3M and Global Tech
Can any of the company-specific risk be diversified away by investing in both 3M and Global Tech 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 Global Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Global Tech Industries, you can compare the effects of market volatilities on 3M and Global Tech 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 Global Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Global Tech.
Diversification Opportunities for 3M and Global Tech
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between 3M and Global is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Global Tech Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Tech Industries 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 Global Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Tech Industries has no effect on the direction of 3M i.e., 3M and Global Tech go up and down completely randomly.
Pair Corralation between 3M and Global Tech
Considering the 90-day investment horizon 3M is expected to generate 514.2 times less return on investment than Global Tech. But when comparing it to its historical volatility, 3M Company is 43.41 times less risky than Global Tech. It trades about 0.01 of its potential returns per unit of risk. Global Tech Industries is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3.00 in Global Tech Industries on September 13, 2024 and sell it today you would lose (1.44) from holding Global Tech Industries or give up 48.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
3M Company vs. Global Tech Industries
Performance |
| Timeline |
| 3M Company |
| Global Tech Industries |
3M and Global Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Global Tech
The main advantage of trading using opposite 3M and Global Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Global Tech 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 Global Tech will offset losses from the drop in Global Tech's long position.| 3M vs. Vast Renewables Limited | 3M vs. 1847 Holdings LLC | 3M vs. Westport Fuel Systems | 3M vs. Falcons Beyond Global, |
| Global Tech vs. HUMANA INC | Global Tech vs. Barloworld Ltd ADR | Global Tech vs. Morningstar Unconstrained Allocation | Global Tech vs. Thrivent High Yield |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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