Correlation Between 3M and Matthews International
Can any of the company-specific risk be diversified away by investing in both 3M and Matthews International 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 Matthews International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Matthews International, you can compare the effects of market volatilities on 3M and Matthews International 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 Matthews International. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Matthews International.
Diversification Opportunities for 3M and Matthews International
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between 3M and Matthews is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Matthews International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews International 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 Matthews International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews International has no effect on the direction of 3M i.e., 3M and Matthews International go up and down completely randomly.
Pair Corralation between 3M and Matthews International
Considering the 90-day investment horizon 3M Company is expected to generate 0.81 times more return on investment than Matthews International. However, 3M Company is 1.24 times less risky than Matthews International. It trades about 0.1 of its potential returns per unit of risk. Matthews International is currently generating about -0.01 per unit of risk. If you would invest 8,359 in 3M Company on August 29, 2024 and sell it today you would earn a total of 5,037 from holding 3M Company or generate 60.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
3M Company vs. Matthews International
Performance |
| Timeline |
| 3M Company |
| Matthews International |
3M and Matthews International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Matthews International
The main advantage of trading using opposite 3M and Matthews International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Matthews International 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 Matthews International will offset losses from the drop in Matthews International's long position.The idea behind 3M Company and Matthews International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Matthews International vs. Steel Partners Holdings | Matthews International vs. Compass Diversified | Matthews International vs. Brookfield Business Partners | Matthews International vs. Tejon Ranch 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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