Correlation Between Appian Corp and 3M

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

Diversification Opportunities for Appian Corp and 3M

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Appian and 3M is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Appian Corp Cl and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and Appian Corp 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 Appian Corp Cl 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 Appian Corp i.e., Appian Corp and 3M go up and down completely randomly.

Pair Corralation between Appian Corp and 3M

Given the investment horizon of 90 days Appian Corp Cl is expected to generate 1.72 times more return on investment than 3M. However, Appian Corp is 1.72 times more volatile than 3M Company. It trades about -0.07 of its potential returns per unit of risk. 3M Company is currently generating about -0.24 per unit of risk. If you would invest  4,316  in Appian Corp Cl on July 4, 2022 and sell it today you would lose (233.00)  from holding Appian Corp Cl or give up 5.4% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Appian Corp Cl  vs.  3M Company

 Performance (%) 
       Timeline  
Appian Corp Cl 
Appian Performance
0 of 100
Over the last 90 days Appian Corp Cl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in November 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Appian Price Channel

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 fragile performance in the last few months, the Stock's primary indicators remain relatively steady which may send shares a bit higher in November 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

3M Price Channel

Appian Corp and 3M Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Appian Corp and 3M

The main advantage of trading using opposite Appian Corp and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Appian Corp 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.
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The idea behind Appian Corp Cl 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.
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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