Correlation Between 3M and DAIMLER AG

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

Diversification Opportunities for 3M and DAIMLER AG

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between 3M and DAIMLER is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and DAIMLER AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIMLER AG 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 DAIMLER AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIMLER AG has no effect on the direction of 3M i.e., 3M and DAIMLER AG go up and down completely randomly.

Pair Corralation between 3M and DAIMLER AG

Considering the 90-day investment horizon 3M Company is expected to under-perform the DAIMLER AG. But the stock apears to be less risky and, when comparing its historical volatility, 3M Company is 1.35 times less risky than DAIMLER AG. The stock trades about -0.1 of its potential returns per unit of risk. The DAIMLER AG is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,300  in DAIMLER AG on July 2, 2022 and sell it today you would earn a total of  369.00  from holding DAIMLER AG or generate 6.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy90.32%
ValuesDaily Returns

3M Company  vs.  DAIMLER AG

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

3M Price Channel

DAIMLER AG 
DAIMLER Performance
0 of 100
Over the last 90 days DAIMLER AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather conflicting forward indicators, DAIMLER AG may actually be approaching a critical reversion point that can send shares even higher in October 2022.

3M and DAIMLER AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 3M and DAIMLER AG

The main advantage of trading using opposite 3M and DAIMLER AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, DAIMLER AG 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 DAIMLER AG will offset losses from the drop in DAIMLER AG's long position.
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The idea behind 3M Company and DAIMLER AG 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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