Correlation Between 3M and US Global
Can any of the company-specific risk be diversified away by investing in both 3M and US Global 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 US Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and US Global Sea, you can compare the effects of market volatilities on 3M and US Global 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 US Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and US Global.
Diversification Opportunities for 3M and US Global
Poor diversification
The 3 months correlation between 3M and SEA is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and US Global Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Global Sea 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 US Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Global Sea has no effect on the direction of 3M i.e., 3M and US Global go up and down completely randomly.
Pair Corralation between 3M and US Global
Considering the 90-day investment horizon 3M Company is expected to generate 1.74 times more return on investment than US Global. However, 3M is 1.74 times more volatile than US Global Sea. It trades about 0.13 of its potential returns per unit of risk. US Global Sea is currently generating about -0.21 per unit of risk. If you would invest 12,689 in 3M Company on August 31, 2024 and sell it today you would earn a total of 559.00 from holding 3M Company or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
3M Company vs. US Global Sea
Performance |
| Timeline |
| 3M Company |
| US Global Sea |
3M and US Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and US Global
The main advantage of trading using opposite 3M and US Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, US Global 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 US Global will offset losses from the drop in US Global'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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| 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. | |
| Transaction History View history of all your transactions and understand their impact on performance |