Correlation Between 3M and Appian Corp

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

Diversification Opportunities for 3M and Appian Corp

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between 3M and Appian is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Appian Corp Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appian Corp Cl 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 Appian Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Appian Corp Cl has no effect on the direction of 3M i.e., 3M and Appian Corp go up and down completely randomly.

Pair Corralation between 3M and Appian Corp

Considering the 90-day investment horizon 3M Company is expected to under-perform the Appian Corp. But the stock apears to be less risky and, when comparing its historical volatility, 3M Company is 1.72 times less risky than Appian Corp. The stock trades about -0.21 of its potential returns per unit of risk. The Appian Corp Cl is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  4,655  in Appian Corp Cl on July 1, 2022 and sell it today you would lose (359.00)  from holding Appian Corp Cl or give up 7.71% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

3M Company  vs.  Appian Corp Cl

 Performance (%) 
       Timeline  
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 latest unsteady performance, the Stock's primary indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

3M Price Channel

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 quite persistent basic indicators, Appian Corp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Appian Price Channel

3M and Appian Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 3M and Appian Corp

The main advantage of trading using opposite 3M and Appian Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Appian Corp 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 Appian Corp will offset losses from the drop in Appian Corp's long position.
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The idea behind 3M Company and Appian Corp Cl 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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