Correlation Between 3M and 103304BV2

Can any of the company-specific risk be diversified away by investing in both 3M and 103304BV2 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 103304BV2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 3M Company and US103304BV23, you can compare the effects of market volatilities on 3M and 103304BV2 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 103304BV2. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and 103304BV2.

Diversification Opportunities for 3M and 103304BV2

-0.29

Correlation Coefficient

3M  103304BV2

Very good diversification

The 3 months correlation between 3M and 103304BV2 is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and US103304BV23 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US103304BV23 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 103304BV2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US103304BV23 has no effect on the direction of 3M i.e., 3M and 103304BV2 go up and down completely randomly.

Pair Corralation between 3M and 103304BV2

Considering the 90-day investment horizon 3M Company is expected to generate 1.67 times more return on investment than 103304BV2. However, 3M is 1.67 times more volatile than US103304BV23. It trades about 0.2 of its potential returns per unit of risk. US103304BV23 is currently generating about -0.11 per unit of risk. If you would invest  9,067  in 3M Company on March 15, 2024 and sell it today you would earn a total of  1,087  from holding 3M Company or generate 11.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.35%
Values	Daily Returns

3M Company  vs.  US103304BV23

3M Company

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, 3M displayed solid returns over the last few months and may actually be approaching a breakup point.

US103304BV23

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US103304BV23 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 103304BV2 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 3M and 103304BV2

The main advantage of trading using opposite 3M and 103304BV2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, 103304BV2 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 103304BV2 will offset losses from the drop in 103304BV2's long position.

The idea behind 3M Company and US103304BV23 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.