Correlation Between 3M and ATT

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

Diversification Opportunities for 3M and ATT

-0.85
  Correlation Coefficient

Pay attention - limited upside

The 1 month correlation between 3M and ATT is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of 3M i.e., 3M and ATT go up and down completely randomly.

Pair Corralation between 3M and ATT

Considering the 90-day investment horizon 3M is expected to generate 1.58 times less return on investment than ATT. But when comparing it to its historical volatility, 3M Company is 1.12 times less risky than ATT. It trades about 0.0 of its potential returns per unit of risk. ATT Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,817  in ATT Inc on May 13, 2022 and sell it today you would lose (8.00)  from holding ATT Inc or give up 0.44% of portfolio value over 90 days.
Time Period1 Month [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

3M Company  vs.  ATT Inc

 Performance (%) 
       Timeline  
3M Company 
3M Performance
33 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting primary indicators, 3M revealed solid returns over the last few months and may actually be approaching a breakup point.

3M Price Channel

ATT Inc 
ATT Performance
0 of 100
Over the last 90 days ATT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in September 2022. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ATT Price Channel

3M and ATT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 3M and ATT

The main advantage of trading using opposite 3M and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, ATT 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 ATT will offset losses from the drop in ATT's long position.

3M Company

Pair trading matchups for 3M

The idea behind 3M Company and ATT Inc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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