Correlation Between 3M and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both 3M and STMicroelectronics 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 STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and STMicroelectronics NV ADR, you can compare the effects of market volatilities on 3M and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and STMicroelectronics.
Diversification Opportunities for 3M and STMicroelectronics
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between 3M and STMicroelectronics is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and STMicroelectronics NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics NV ADR 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics NV ADR has no effect on the direction of 3M i.e., 3M and STMicroelectronics go up and down completely randomly.
Pair Corralation between 3M and STMicroelectronics
Considering the 90-day investment horizon 3M Company is expected to generate 0.57 times more return on investment than STMicroelectronics. However, 3M Company is 1.77 times less risky than STMicroelectronics. It trades about 0.2 of its potential returns per unit of risk. STMicroelectronics NV ADR is currently generating about -0.1 per unit of risk. If you would invest 9,193 in 3M Company on February 6, 2024 and sell it today you would earn a total of 522.00 from holding 3M Company or generate 5.68% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
3M Company vs. STMicroelectronics NV ADR
Performance |
Timeline |
3M Company |
STMicroelectronics NV ADR |
3M and STMicroelectronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with 3M and STMicroelectronics
The main advantage of trading using opposite 3M and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.3M vs. Griffon | 3M vs. Compass Diversified Holdings | 3M vs. Brookfield Business Partners | 3M vs. Aquagold International |
STMicroelectronics vs. First Solar | STMicroelectronics vs. Sunrun Inc | STMicroelectronics vs. Canadian Solar | STMicroelectronics vs. SunPower |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
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 |