Correlation Between 3M and TGIF
Can any of the company-specific risk be diversified away by investing in both 3M and TGIF 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 TGIF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and TGIF, you can compare the effects of market volatilities on 3M and TGIF 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 TGIF. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and TGIF.
Diversification Opportunities for 3M and TGIF
Very good diversification
The 3 months correlation between 3M and TGIF is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and TGIF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TGIF 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 TGIF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TGIF has no effect on the direction of 3M i.e., 3M and TGIF go up and down completely randomly.
Pair Corralation between 3M and TGIF
Considering the 90-day investment horizon 3M Company is expected to generate 7.49 times more return on investment than TGIF. However, 3M is 7.49 times more volatile than TGIF. It trades about 0.08 of its potential returns per unit of risk. TGIF is currently generating about 0.2 per unit of risk. If you would invest 7,937 in 3M Company on September 2, 2024 and sell it today you would earn a total of 5,416 from holding 3M Company or generate 68.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 7.8% |
| Values | Daily Returns |
3M Company vs. TGIF
Performance |
| Timeline |
| 3M Company |
| TGIF |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
3M and TGIF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and TGIF
The main advantage of trading using opposite 3M and TGIF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, TGIF 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 TGIF will offset losses from the drop in TGIF'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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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