Correlation Between 3M and Teijin
Can any of the company-specific risk be diversified away by investing in both 3M and Teijin 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 Teijin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Teijin, you can compare the effects of market volatilities on 3M and Teijin 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 Teijin. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Teijin.
Diversification Opportunities for 3M and Teijin
Very weak diversification
The 3 months correlation between 3M and Teijin is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Teijin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teijin 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 Teijin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teijin has no effect on the direction of 3M i.e., 3M and Teijin go up and down completely randomly.
Pair Corralation between 3M and Teijin
Considering the 90-day investment horizon 3M Company is expected to generate 0.9 times more return on investment than Teijin. However, 3M Company is 1.11 times less risky than Teijin. It trades about 0.11 of its potential returns per unit of risk. Teijin is currently generating about -0.03 per unit of risk. If you would invest 9,870 in 3M Company on September 1, 2024 and sell it today you would earn a total of 3,483 from holding 3M Company or generate 35.29% 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. Teijin
Performance |
| Timeline |
| 3M Company |
| Teijin |
3M and Teijin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Teijin
The main advantage of trading using opposite 3M and Teijin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Teijin 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 Teijin will offset losses from the drop in Teijin's long position.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
| Teijin vs. Toray Industries ADR | Teijin vs. Nitto Denko Corp | Teijin vs. NSK Ltd ADR | Teijin vs. Secom Co Ltd |
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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