Correlation Between 3M and Keppel
Can any of the company-specific risk be diversified away by investing in both 3M and Keppel 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 Keppel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Keppel Limited, you can compare the effects of market volatilities on 3M and Keppel 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 Keppel. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Keppel.
Diversification Opportunities for 3M and Keppel
Very weak diversification
The 3 months correlation between 3M and Keppel is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Keppel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keppel Limited 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 Keppel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keppel Limited has no effect on the direction of 3M i.e., 3M and Keppel go up and down completely randomly.
Pair Corralation between 3M and Keppel
Considering the 90-day investment horizon 3M Company is expected to under-perform the Keppel. But the stock apears to be less risky and, when comparing its historical volatility, 3M Company is 3.09 times less risky than Keppel. The stock trades about 0.0 of its potential returns per unit of risk. The Keppel Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,000.00 in Keppel Limited on September 20, 2024 and sell it today you would earn a total of 16.00 from holding Keppel Limited or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
3M Company vs. Keppel Limited
Performance |
| Timeline |
| 3M Company |
| Keppel Limited |
3M and Keppel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Keppel
The main advantage of trading using opposite 3M and Keppel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Keppel 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 Keppel will offset losses from the drop in Keppel's long position.| 3M vs. Vast Renewables Limited | 3M vs. 1847 Holdings LLC | 3M vs. Westport Fuel Systems | 3M vs. Brookfield Business Partners |
| Keppel vs. Arca Continental SAB | Keppel vs. Becle SA de | Keppel vs. Aquagold International | Keppel vs. Morningstar Unconstrained Allocation |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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