Correlation Between MRC Global and 3M
Can any of the company-specific risk be diversified away by investing in both MRC Global and 3M 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 MRC Global and 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MRC Global and 3M Company, you can compare the effects of market volatilities on MRC Global and 3M 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 MRC Global with a short position of 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of MRC Global and 3M.
Diversification Opportunities for MRC Global and 3M
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MRC and 3M is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding MRC Global and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and MRC Global 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 MRC Global are associated (or correlated) with 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of MRC Global i.e., MRC Global and 3M go up and down completely randomly.
Pair Corralation between MRC Global and 3M
Considering the 90-day investment horizon MRC Global is expected to generate 1.03 times less return on investment than 3M. In addition to that, MRC Global is 1.48 times more volatile than 3M Company. It trades about 0.36 of its total potential returns per unit of risk. 3M Company is currently generating about 0.55 per unit of volatility. If you would invest 12,970 in 3M Company on November 3, 2024 and sell it today you would earn a total of 2,250 from holding 3M Company or generate 17.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
MRC Global vs. 3M Company
Performance |
| Timeline |
| MRC Global |
| 3M Company |
MRC Global and 3M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MRC Global and 3M
The main advantage of trading using opposite MRC Global and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MRC Global position performs unexpectedly, 3M 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 3M will offset losses from the drop in 3M's long position.| MRC Global vs. NOV Inc | MRC Global vs. Ranger Energy Services | MRC Global vs. Oil States International | MRC Global vs. Geospace Technologies |
| 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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