Correlation Between 3M and Farfetch

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both 3M and Farfetch 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 Farfetch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Farfetch Ltd Cl, you can compare the effects of market volatilities on 3M and Farfetch 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 Farfetch. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Farfetch.

Diversification Opportunities for 3M and Farfetch

0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between 3M and Farfetch is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Farfetch Ltd Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farfetch Ltd 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 Farfetch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farfetch Ltd Cl has no effect on the direction of 3M i.e., 3M and Farfetch go up and down completely randomly.

Pair Corralation between 3M and Farfetch

Considering the 90-day investment horizon 3M is expected to generate 2.2 times less return on investment than Farfetch. But when comparing it to its historical volatility, 3M Company is 3.68 times less risky than Farfetch. It trades about 0.41 of its potential returns per unit of risk. Farfetch Ltd Cl is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  685.00  in Farfetch Ltd Cl on May 10, 2022 and sell it today you would earn a total of  209.00  from holding Farfetch Ltd Cl or generate 30.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

3M Company  vs.  Farfetch Ltd 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 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

Farfetch Ltd Cl 
Farfetch Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Farfetch Ltd Cl are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Farfetch reported solid returns over the last few months and may actually be approaching a breakup point.

Farfetch Price Channel

3M and Farfetch Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 3M and Farfetch

The main advantage of trading using opposite 3M and Farfetch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Farfetch 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 Farfetch will offset losses from the drop in Farfetch's long position.
The idea behind 3M Company and Farfetch Ltd 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.
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

Other Complementary Tools

Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
Go
Portfolio Center
All portfolio management and optimization tools to improve performance of your portfolios
Go
Equity Forecasting
Use basic forecasting models to generate price predictions and determine price momentum
Go
Performance Analysis
Check effects of mean-variance optimization against your current asset allocation
Go
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Go
Technical Analysis
Check basic technical indicators and analysis based on most latest market data
Go
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Go
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Go