Correlation Between 3M India and Page Industries

Can any of the company-specific risk be diversified away by investing in both 3M India and Page Industries 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 Page Industries 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 Page Industries Limited, you can compare the effects of market volatilities on 3M India and Page Industries 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 Page Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M India and Page Industries.

Diversification Opportunities for 3M India and Page Industries

0.82

Correlation Coefficient

3M India  Page Industries

Very poor diversification

The 3 months correlation between 3MINDIA and Page is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding 3M India Limited and Page Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Page Industries 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 Page Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Page Industries has no effect on the direction of 3M India i.e., 3M India and Page Industries go up and down completely randomly.

Pair Corralation between 3M India and Page Industries

Assuming the 90 days trading horizon 3M India Limited is expected to under-perform the Page Industries. But the stock apears to be less risky and, when comparing its historical volatility, 3M India Limited is 1.1 times less risky than Page Industries. The stock trades about -0.2 of its potential returns per unit of risk. The Page Industries Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,448,810  in Page Industries Limited on November 29, 2024 and sell it today you would lose (255,855) from holding Page Industries Limited or give up 5.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

3M India Limited  vs.  Page Industries Limited

3M India Limited

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Page Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Page Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Page Industries is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with 3M India and Page Industries

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

The idea behind 3M India Limited and Page Industries Limited 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.