Correlation Between 3M and Clearbridge Energy

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

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

Diversification Opportunities for 3M and Clearbridge Energy

-0.34

Correlation Coefficient

3M  Clearbridge Energy

Very good diversification

The 3 months correlation between 3M and Clearbridge is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Clearbridge Energy Mlp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Energy Mlp 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 Clearbridge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Energy Mlp has no effect on the direction of 3M i.e., 3M and Clearbridge Energy go up and down completely randomly.

Pair Corralation between 3M and Clearbridge Energy

Considering the 90-day investment horizon 3M Company is expected to generate 0.67 times more return on investment than Clearbridge Energy. However, 3M Company is 1.5 times less risky than Clearbridge Energy. It trades about -0.07 of its potential returns per unit of risk. Clearbridge Energy Mlp is currently generating about -0.15 per unit of risk. If you would invest  13,017  in 3M Company on September 19, 2024 and sell it today you would lose (212.00) from holding 3M Company or give up 1.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

3M Company  vs.  Clearbridge Energy Mlp

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.

Clearbridge Energy Mlp

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Energy Mlp are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of very unsteady primary indicators, Clearbridge Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with 3M and Clearbridge Energy

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

The idea behind 3M Company and Clearbridge Energy Mlp 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 Anywhere module to track or share privately all of your investments from the convenience of any device.