Correlation Between Visa and 3M
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and 3M Company, you can compare the effects of market volatilities on Visa 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 Visa with a short position of 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and 3M.
Diversification Opportunities for Visa and 3M
Very weak diversification
The 3 months correlation between Visa and 3M is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and Visa 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 Visa Class A 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 Visa i.e., Visa and 3M go up and down completely randomly.
Pair Corralation between Visa and 3M
Taking into account the 90-day investment horizon Visa is expected to generate 1.17 times less return on investment than 3M. But when comparing it to its historical volatility, Visa Class A is 1.47 times less risky than 3M. It trades about 0.25 of its potential returns per unit of risk. 3M Company is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 260,346 in 3M Company on October 29, 2024 and sell it today you would earn a total of 51,654 from holding 3M Company or generate 19.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.36% |
| Values | Daily Returns |
Visa Class A vs. 3M Company
Performance |
| Timeline |
| Visa Class A |
| 3M Company |
Visa and 3M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and 3M
The main advantage of trading using opposite Visa and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| 3M vs. Honeywell International | 3M vs. Emerson Electric Co | 3M vs. iShares Global Timber | 3M vs. Vanguard World |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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