Correlation Between Jardine Cycle and 3M

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

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

Diversification Opportunities for Jardine Cycle and 3M

0.05

Correlation Coefficient

Jardine Cycle  3M

Significant diversification

The 3 months correlation between Jardine and 3M is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Jardine Cycle Carriage and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and Jardine Cycle 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 Jardine Cycle Carriage 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 Jardine Cycle i.e., Jardine Cycle and 3M go up and down completely randomly.

Pair Corralation between Jardine Cycle and 3M

Assuming the 90 days horizon Jardine Cycle is expected to generate 2.91 times less return on investment than 3M. But when comparing it to its historical volatility, Jardine Cycle Carriage is 1.13 times less risky than 3M. It trades about 0.04 of its potential returns per unit of risk. 3M Company is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  9,870  in 3M Company on September 1, 2024 and sell it today you would earn a total of  3,483  from holding 3M Company or generate 35.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Jardine Cycle Carriage  vs.  3M Company

Jardine Cycle Carriage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jardine Cycle Carriage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

3M Company

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, 3M is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Jardine Cycle and 3M

The main advantage of trading using opposite Jardine Cycle and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jardine Cycle 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 Jardine Cycle Carriage 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.