Correlation Between 3M and Boeing

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Can any of the company-specific risk be diversified away by investing in both 3M and Boeing 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 3M and Boeing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and The Boeing, you can compare the effects of market volatilities on 3M and Boeing 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 3M with a short position of Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Boeing.

Diversification Opportunities for 3M and Boeing

-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between 3M and Boeing is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and 3M 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 3M Company are associated (or correlated) with Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of 3M i.e., 3M and Boeing go up and down completely randomly.

Pair Corralation between 3M and Boeing

Considering the 90-day investment horizon 3M Company is expected to under-perform the Boeing. But the stock apears to be less risky and, when comparing its historical volatility, 3M Company is 1.36 times less risky than Boeing. The stock trades about -0.02 of its potential returns per unit of risk. The The Boeing is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  16,025  in The Boeing on October 30, 2022 and sell it today you would earn a total of  5,092  from holding The Boeing or generate 31.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

3M Company  vs.  The Boeing

 Performance (%) 
       Timeline  
3M Company 
3M Performance
0 of 100
Over the last 90 days 3M Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's primary indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

3M Price Channel

Boeing 
Boeing Performance
24 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

Boeing Price Channel

3M and Boeing Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 3M and Boeing

The main advantage of trading using opposite 3M and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Boeing 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 Boeing will offset losses from the drop in Boeing's long position.
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The idea behind 3M Company and The Boeing 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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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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