Correlation Between 3M and FTAI Infrastructure
Can any of the company-specific risk be diversified away by investing in both 3M and FTAI Infrastructure 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 FTAI Infrastructure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and FTAI Infrastructure, you can compare the effects of market volatilities on 3M and FTAI Infrastructure 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 FTAI Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and FTAI Infrastructure.
Diversification Opportunities for 3M and FTAI Infrastructure
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between 3M and FTAI is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and FTAI Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Infrastructure 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 FTAI Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAI Infrastructure has no effect on the direction of 3M i.e., 3M and FTAI Infrastructure go up and down completely randomly.
Pair Corralation between 3M and FTAI Infrastructure
Considering the 90-day investment horizon 3M Company is expected to under-perform the FTAI Infrastructure. But the stock apears to be less risky and, when comparing its historical volatility, 3M Company is 3.46 times less risky than FTAI Infrastructure. The stock trades about -0.11 of its potential returns per unit of risk. The FTAI Infrastructure is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 641.00 in FTAI Infrastructure on January 30, 2024 and sell it today you would earn a total of 101.00 from holding FTAI Infrastructure or generate 15.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 95.45% |
Values | Daily Returns |
3M Company vs. FTAI Infrastructure
Performance |
Timeline |
3M Company |
FTAI Infrastructure |
3M and FTAI Infrastructure Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with 3M and FTAI Infrastructure
The main advantage of trading using opposite 3M and FTAI Infrastructure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, FTAI Infrastructure 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 FTAI Infrastructure will offset losses from the drop in FTAI Infrastructure's long position.3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
FTAI Infrastructure vs. Steel Partners Holdings | FTAI Infrastructure vs. Brookfield Business Partners | FTAI Infrastructure vs. Griffon | FTAI Infrastructure vs. Tejon Ranch Co |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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