Correlation Between 3M India and Barbeque Nation

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

Diversification Opportunities for 3M India and Barbeque Nation

3MINDIABarbequeDiversified Away3MINDIABarbequeDiversified Away100%
0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between 3MINDIA and Barbeque is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding 3M India Limited and Barbeque Nation Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barbeque Nation Hosp and 3M India 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 India Limited are associated (or correlated) with Barbeque Nation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barbeque Nation Hosp has no effect on the direction of 3M India i.e., 3M India and Barbeque Nation go up and down completely randomly.

Pair Corralation between 3M India and Barbeque Nation

Assuming the 90 days trading horizon 3M India Limited is expected to generate 0.89 times more return on investment than Barbeque Nation. However, 3M India Limited is 1.13 times less risky than Barbeque Nation. It trades about -0.13 of its potential returns per unit of risk. Barbeque Nation Hospitality is currently generating about -0.29 per unit of risk. If you would invest  3,522,300  in 3M India Limited on September 24, 2024 and sell it today you would lose (440,915) from holding 3M India Limited or give up 12.52% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

3M India Limited  vs.  Barbeque Nation Hospitality

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20-15-10-50510
JavaScript chart by amCharts 3.21.153MINDIA BARBEQUE
       Timeline  
3M India Limited 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days 3M India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec31,00032,00033,00034,00035,00036,00037,000
Barbeque Nation Hosp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Barbeque Nation Hospitality 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec500550600650700

3M India and Barbeque Nation Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.64-2.0-1.37-0.73-0.09850.491.071.652.232.81 0.080.100.120.140.16
JavaScript chart by amCharts 3.21.153MINDIA BARBEQUE
       Returns  

Pair Trading with 3M India and Barbeque Nation

The main advantage of trading using opposite 3M India and Barbeque Nation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M India position performs unexpectedly, Barbeque Nation 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 Barbeque Nation will offset losses from the drop in Barbeque Nation's long position.
The idea behind 3M India Limited and Barbeque Nation Hospitality 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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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 the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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