Correlation Between Seaboard and 3M
Can any of the company-specific risk be diversified away by investing in both Seaboard 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 Seaboard and 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seaboard and 3M Company, you can compare the effects of market volatilities on Seaboard 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 Seaboard with a short position of 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seaboard and 3M.
Diversification Opportunities for Seaboard and 3M
Very weak diversification
The 3 months correlation between Seaboard and 3M is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Seaboard and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and Seaboard 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 Seaboard 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 Seaboard i.e., Seaboard and 3M go up and down completely randomly.
Pair Corralation between Seaboard and 3M
Considering the 90-day investment horizon Seaboard is expected to under-perform the 3M. But the stock apears to be less risky and, when comparing its historical volatility, Seaboard is 1.49 times less risky than 3M. The stock trades about -0.06 of its potential returns per unit of risk. The 3M Company is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 8,584 in 3M Company on September 3, 2024 and sell it today you would earn a total of 4,705 from holding 3M Company or generate 54.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seaboard vs. 3M Company
Performance |
| Timeline |
| Seaboard |
| 3M Company |
Seaboard and 3M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seaboard and 3M
The main advantage of trading using opposite Seaboard and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seaboard 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.| Seaboard vs. White Mountains Insurance | Seaboard vs. Cable One | Seaboard vs. NVR Inc | Seaboard vs. Alexanders |
| 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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