Correlation Between Ford and 3M
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and 3M Company, you can compare the effects of market volatilities on Ford 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 Ford with a short position of 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and 3M.
Diversification Opportunities for Ford and 3M
Very good diversification
The 3 months correlation between Ford and 3M is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and Ford 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 Ford Motor 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 Ford i.e., Ford and 3M go up and down completely randomly.
Pair Corralation between Ford and 3M
Taking into account the 90-day investment horizon Ford is expected to generate 1.35 times less return on investment than 3M. In addition to that, Ford is 1.1 times more volatile than 3M Company. It trades about 0.23 of its total potential returns per unit of risk. 3M Company is currently generating about 0.33 per unit of volatility. If you would invest 9,230 in 3M Company on December 29, 2023 and sell it today you would earn a total of 1,377 from holding 3M Company or generate 14.92% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Ford Motor vs. 3M Company
Performance |
Timeline |
Ford Motor |
3M Company |
Ford and 3M Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and 3M
The main advantage of trading using opposite Ford and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.Ford vs. Mobileye Global Class | Ford vs. Goodyear Tire Rubber | Ford vs. Quantumscape Corp | Ford vs. Visteon Corp |
3M vs. 1847 Holdings LLC | 3M vs. NN Inc | 3M vs. Westport Fuel Systems | 3M vs. Brookfield Business Partners |
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.
Other Complementary Tools
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
CEOs Directory Screen CEOs from public companies around the world | |
Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |