Correlation Between Swire Pacific and 3M
Can any of the company-specific risk be diversified away by investing in both Swire Pacific 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 Swire Pacific and 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Swire Pacific Ltd and 3M Company, you can compare the effects of market volatilities on Swire Pacific 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 Swire Pacific with a short position of 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swire Pacific and 3M.
Diversification Opportunities for Swire Pacific and 3M
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Swire and 3M is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Swire Pacific Ltd and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and Swire Pacific 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 Swire Pacific Ltd 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 Swire Pacific i.e., Swire Pacific and 3M go up and down completely randomly.
Pair Corralation between Swire Pacific and 3M
Assuming the 90 days horizon Swire Pacific is expected to generate 3.82 times less return on investment than 3M. In addition to that, Swire Pacific is 1.32 times more volatile than 3M Company. It trades about 0.02 of its total potential returns per unit of risk. 3M Company is currently generating about 0.11 per unit of volatility. 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 Against |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Swire Pacific Ltd vs. 3M Company
Performance |
| Timeline |
| Swire Pacific |
| 3M Company |
Swire Pacific and 3M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Swire Pacific and 3M
The main advantage of trading using opposite Swire Pacific and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swire Pacific 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.| Swire Pacific vs. CITIC Limited | Swire Pacific vs. Fosun International | Swire Pacific vs. Cibl Inc | Swire Pacific vs. Jardine Matheson Holdings |
| 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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