Correlation Between 3M and Killbuck Bancshares

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

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

Diversification Opportunities for 3M and Killbuck Bancshares

0.37

Correlation Coefficient

3M  Killbuck Bancshares

Weak diversification

The 3 months correlation between 3M and Killbuck is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Killbuck Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Killbuck Bancshares 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 Killbuck Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Killbuck Bancshares has no effect on the direction of 3M i.e., 3M and Killbuck Bancshares go up and down completely randomly.

Pair Corralation between 3M and Killbuck Bancshares

Considering the 90-day investment horizon 3M Company is expected to generate 0.98 times more return on investment than Killbuck Bancshares. However, 3M Company is 1.02 times less risky than Killbuck Bancshares. It trades about -0.03 of its potential returns per unit of risk. Killbuck Bancshares is currently generating about -0.32 per unit of risk. If you would invest  14,930  in 3M Company on December 4, 2024 and sell it today you would lose (221.00) from holding 3M Company or give up 1.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

3M Company  vs.  Killbuck Bancshares

3M Company

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 10 (%) 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.

Killbuck Bancshares

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Killbuck Bancshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Killbuck Bancshares sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 3M and Killbuck Bancshares

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

The idea behind 3M Company and Killbuck Bancshares 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.