Correlation Between 3M and Harbor Diversified

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

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

Diversification Opportunities for 3M and Harbor Diversified

0.48

Correlation Coefficient

3M  Harbor Diversified

Very weak diversification

The 3 months correlation between 3M and Harbor is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Harbor Diversified Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Diversified 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 Harbor Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Diversified has no effect on the direction of 3M i.e., 3M and Harbor Diversified go up and down completely randomly.

Pair Corralation between 3M and Harbor Diversified

Considering the 90-day investment horizon 3M Company is expected to generate 1.86 times more return on investment than Harbor Diversified. However, 3M is 1.86 times more volatile than Harbor Diversified International. It trades about 0.19 of its potential returns per unit of risk. Harbor Diversified International is currently generating about 0.13 per unit of risk. If you would invest  12,954  in 3M Company on December 27, 2024 and sell it today you would earn a total of  2,314  from holding 3M Company or generate 17.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

3M Company  vs.  Harbor Diversified Internation

3M Company

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, 3M displayed solid returns over the last few months and may actually be approaching a breakup point.

Harbor Diversified

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Diversified International are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Harbor Diversified may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with 3M and Harbor Diversified

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

The idea behind 3M Company and Harbor Diversified International 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.