Correlation Between 3M and ATT
Can any of the company-specific risk be diversified away by investing in both 3M and ATT 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 ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and ATT Inc, you can compare the effects of market volatilities on 3M and ATT 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 ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and ATT.
Diversification Opportunities for 3M and ATT
Poor diversification
The 3 months correlation between 3M and ATT is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of 3M i.e., 3M and ATT go up and down completely randomly.
Pair Corralation between 3M and ATT
Considering the 90-day investment horizon 3M is expected to generate 2.57 times less return on investment than ATT. But when comparing it to its historical volatility, 3M Company is 1.19 times less risky than ATT. It trades about 0.22 of its potential returns per unit of risk. ATT Inc is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest 2,229 in ATT Inc on November 18, 2024 and sell it today you would earn a total of 358.00 from holding ATT Inc or generate 16.06% 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. ATT Inc
Performance |
| Timeline |
| 3M Company |
| ATT Inc |
3M and ATT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and ATT
The main advantage of trading using opposite 3M and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, ATT 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 ATT will offset losses from the drop in ATT's long position.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
| ATT vs. Liberty Global PLC | ATT vs. Liberty Latin America | ATT vs. Liberty Latin America | ATT vs. Liberty Broadband Srs |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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