Correlation Between 3M and HP
Can any of the company-specific risk be diversified away by investing in both 3M and HP 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 HP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and HP Inc, you can compare the effects of market volatilities on 3M and HP 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 HP. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and HP.
Diversification Opportunities for 3M and HP
Pay attention - limited upside
The 3 months correlation between 3M and HP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc 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 HP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HP Inc has no effect on the direction of 3M i.e., 3M and HP go up and down completely randomly.
Pair Corralation between 3M and HP
Considering the 90-day investment horizon 3M is expected to generate 6.33 times less return on investment than HP. But when comparing it to its historical volatility, 3M Company is 1.04 times less risky than HP. It trades about 0.02 of its potential returns per unit of risk. HP Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,742 in HP Inc on August 28, 2024 and sell it today you would earn a total of 188.00 from holding HP Inc or generate 5.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
3M Company vs. HP Inc
Performance |
| Timeline |
| 3M Company |
| HP Inc |
3M and HP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and HP
The main advantage of trading using opposite 3M and HP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, HP 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 HP will offset losses from the drop in HP's long position.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |