Correlation Between Archer Aviation and 3M

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

Diversification Opportunities for Archer Aviation and 3M

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Archer and 3M is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Archer Aviation and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and Archer Aviation 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 Archer Aviation 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 Archer Aviation i.e., Archer Aviation and 3M go up and down completely randomly.

Pair Corralation between Archer Aviation and 3M

Given the investment horizon of 90 days Archer Aviation is expected to generate 2.75 times more return on investment than 3M. However, Archer Aviation is 2.75 times more volatile than 3M Company. It trades about 0.38 of its potential returns per unit of risk. 3M Company is currently generating about 0.43 per unit of risk. If you would invest  301.00  in Archer Aviation on May 12, 2022 and sell it today you would earn a total of  122.00  from holding Archer Aviation or generate 40.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Archer Aviation  vs.  3M Company

 Performance (%) 
       Timeline  
Archer Aviation 
Archer Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Archer Aviation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical indicators, Archer Aviation reported solid returns over the last few months and may actually be approaching a breakup point.

Archer Price Channel

3M Company 
3M Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady primary indicators, 3M is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

3M Price Channel

Archer Aviation and 3M Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Archer Aviation and 3M

The main advantage of trading using opposite Archer Aviation and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Archer Aviation 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 Archer Aviation 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.
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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