Correlation Between 3M and Jardine Cycle

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

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

Diversification Opportunities for 3M and Jardine Cycle

0.05

Correlation Coefficient

3M  Jardine Cycle

Significant diversification

The 3 months correlation between 3M and Jardine is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Jardine Cycle Carriage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jardine Cycle Carriage 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 Jardine Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jardine Cycle Carriage has no effect on the direction of 3M i.e., 3M and Jardine Cycle go up and down completely randomly.

Pair Corralation between 3M and Jardine Cycle

Considering the 90-day investment horizon 3M Company is expected to generate 0.73 times more return on investment than Jardine Cycle. However, 3M Company is 1.37 times less risky than Jardine Cycle. It trades about 0.13 of its potential returns per unit of risk. Jardine Cycle Carriage is currently generating about -0.1 per unit of risk. If you would invest  12,779  in 3M Company on September 1, 2024 and sell it today you would earn a total of  574.00  from holding 3M Company or generate 4.49% return on investment over 90 days.

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

3M Company  vs.  Jardine Cycle Carriage

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.

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.

Pair Trading with 3M and Jardine Cycle

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

The idea behind 3M Company and Jardine Cycle Carriage 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.