Correlation Between 3M and Liberty Media

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

Diversification Opportunities for 3M and Liberty Media

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between 3M and Liberty is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Liberty Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media 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 Liberty Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Media has no effect on the direction of 3M i.e., 3M and Liberty Media go up and down completely randomly.

Pair Corralation between 3M and Liberty Media

Considering the 90-day investment horizon 3M Company is expected to under-perform the Liberty Media. In addition to that, 3M is 1.12 times more volatile than Liberty Media. It trades about -0.05 of its total potential returns per unit of risk. Liberty Media is currently generating about 0.05 per unit of volatility. If you would invest  2,798  in Liberty Media on August 29, 2022 and sell it today you would earn a total of  502.00  from holding Liberty Media or generate 17.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

3M Company  vs.  Liberty Media

 Performance (%) 
       Timeline  
3M Company 
3M Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 2 (%) 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 new stock price chaos, may contribute to medium-term losses for the stakeholders.

3M Price Channel

Liberty Media 
Liberty Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Liberty Media may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Liberty Price Channel

3M and Liberty Media Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 3M and Liberty Media

The main advantage of trading using opposite 3M and Liberty Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Liberty Media 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 Liberty Media will offset losses from the drop in Liberty Media's long position.
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The idea behind 3M Company and Liberty Media 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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