Correlation Between Martin Currie and 3M

Can any of the company-specific risk be diversified away by investing in both Martin Currie 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 Martin Currie and 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Martin Currie Emerging and 3M Company, you can compare the effects of market volatilities on Martin Currie 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 Martin Currie with a short position of 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Currie and 3M.

Diversification Opportunities for Martin Currie and 3M

0.42

Correlation Coefficient

Martin Currie  3M

Very weak diversification

The 3 months correlation between Martin and 3M is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Martin Currie Emerging and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and Martin Currie 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 Martin Currie Emerging 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 Martin Currie i.e., Martin Currie and 3M go up and down completely randomly.

Pair Corralation between Martin Currie and 3M

Assuming the 90 days horizon Martin Currie is expected to generate 3.54 times less return on investment than 3M. But when comparing it to its historical volatility, Martin Currie Emerging is 1.88 times less risky than 3M. It trades about 0.07 of its potential returns per unit of risk. 3M Company is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  6,887  in 3M Company on January 20, 2024 and sell it today you would earn a total of  2,261  from holding 3M Company or generate 32.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

Martin Currie Emerging  vs.  3M Company

Martin Currie Emerging

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Currie Emerging are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Martin Currie is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

3M Company

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, 3M is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Martin Currie and 3M

The main advantage of trading using opposite Martin Currie and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Currie 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.

The idea behind Martin Currie Emerging and 3M Company pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.