Correlation Between Halma Plc and 3M

Can any of the company-specific risk be diversified away by investing in both Halma Plc and 3M 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 Halma Plc and 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Halma plc and 3M Company, you can compare the effects of market volatilities on Halma Plc and 3M 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 Halma Plc with a short position of 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Halma Plc and 3M.

Diversification Opportunities for Halma Plc and 3M

0.14

Correlation Coefficient

Halma Plc  3M

Average diversification

The 3 months correlation between Halma and 3M is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Halma plc and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and Halma Plc 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 Halma plc are associated (or correlated) with 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of Halma Plc i.e., Halma Plc and 3M go up and down completely randomly.

Pair Corralation between Halma Plc and 3M

Assuming the 90 days horizon Halma Plc is expected to generate 1.03 times less return on investment than 3M. In addition to that, Halma Plc is 1.29 times more volatile than 3M Company. It trades about 0.03 of its total potential returns per unit of risk. 3M Company is currently generating about 0.04 per unit of volatility. If you would invest  9,354  in 3M Company on October 9, 2024 and sell it today you would earn a total of  3,675  from holding 3M Company or generate 39.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.78%
Values	Daily Returns

Halma plc  vs.  3M Company

Halma plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Halma plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Halma Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

3M Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 3M Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, 3M is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Halma Plc and 3M

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

The idea behind Halma plc and 3M Company 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.