Correlation Between 3M and Microsoft Corp

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both 3M and Microsoft 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 Microsoft 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 Microsoft Corp, you can compare the effects of market volatilities on 3M and Microsoft 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 Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Microsoft Corp.

Diversification Opportunities for 3M and Microsoft Corp

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between 3M and Microsoft is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Microsoft Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp 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 Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp has no effect on the direction of 3M i.e., 3M and Microsoft Corp go up and down completely randomly.

Pair Corralation between 3M and Microsoft Corp

Considering the 90-day investment horizon 3M Company is expected to under-perform the Microsoft Corp. In addition to that, 3M is 1.52 times more volatile than Microsoft Corp. It trades about -0.39 of its total potential returns per unit of risk. Microsoft Corp is currently generating about -0.41 per unit of volatility. If you would invest  27,885  in Microsoft Corp on June 26, 2022 and sell it today you would lose (4,093)  from holding Microsoft Corp or give up 14.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

3M Company  vs.  Microsoft Corp

 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 unsteady 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

Microsoft Corp 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Microsoft Price Channel

3M and Microsoft Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 3M and Microsoft Corp

The main advantage of trading using opposite 3M and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Microsoft 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 Microsoft Corp will offset losses from the drop in Microsoft Corp's long position.
3M vs. BUSHVELD MINERALS LTD
The idea behind 3M Company and Microsoft Corp 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.
Microsoft Corp vs. Industrias Bachoco SA
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

Other Complementary Tools

Piotroski F Score
Get Piotroski F Score based on binary analysis strategy of nine different fundamentals
Go
Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
Go
Portfolio Manager
State of the art Portfolio Manager to monitor and improve performance of your invested capital
Go
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Go
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Go
Watchlist Optimization
Optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm
Go
Balance Of Power
Check stock momentum by analyzing Balance Of Power indicator and other technical ratios
Go
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Go
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Go
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Go