Correlation Between 3M and BlackRock AAA

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

By analyzing existing cross correlation between 3M Company and BlackRock AAA CLO, you can compare the effects of market volatilities on 3M and BlackRock AAA 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 BlackRock AAA. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and BlackRock AAA.

Diversification Opportunities for 3M and BlackRock AAA

-0.39

Correlation Coefficient

3M  BlackRock AAA

Very good diversification

The 3 months correlation between 3M and BlackRock is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and BlackRock AAA CLO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock AAA CLO 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 BlackRock AAA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock AAA CLO has no effect on the direction of 3M i.e., 3M and BlackRock AAA go up and down completely randomly.

Pair Corralation between 3M and BlackRock AAA

Considering the 90-day investment horizon 3M Company is expected to under-perform the BlackRock AAA. In addition to that, 3M is 28.53 times more volatile than BlackRock AAA CLO. It trades about -0.03 of its total potential returns per unit of risk. BlackRock AAA CLO is currently generating about 0.49 per unit of volatility. If you would invest  5,103  in BlackRock AAA CLO on September 14, 2024 and sell it today you would earn a total of  78.00  from holding BlackRock AAA CLO or generate 1.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

3M Company  vs.  BlackRock AAA CLO

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 latest stock price disarray, may contribute to short-term losses for the investors.

BlackRock AAA CLO

Risk-Adjusted Performance

38 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock AAA CLO are ranked lower than 38 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BlackRock AAA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 3M and BlackRock AAA

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

The idea behind 3M Company and BlackRock AAA CLO 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.