Correlation Between Marubeni Corp and 3M

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

By analyzing existing cross correlation between Marubeni Corp ADR and 3M Company, you can compare the effects of market volatilities on Marubeni Corp and 3M 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 Marubeni Corp with a short position of 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marubeni Corp and 3M.

Diversification Opportunities for Marubeni Corp and 3M

0.63

Correlation Coefficient

Marubeni Corp  3M

Poor diversification

The 3 months correlation between Marubeni and 3M is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Marubeni Corp ADR and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company and Marubeni Corp 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 Marubeni Corp ADR are associated (or correlated) with 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of Marubeni Corp i.e., Marubeni Corp and 3M go up and down completely randomly.

Pair Corralation between Marubeni Corp and 3M

Assuming the 90 days horizon Marubeni Corp ADR is expected to under-perform the 3M. In addition to that, Marubeni Corp is 1.23 times more volatile than 3M Company. It trades about -0.08 of its total potential returns per unit of risk. 3M Company is currently generating about 0.01 per unit of volatility. If you would invest  13,070  in 3M Company on September 5, 2024 and sell it today you would earn a total of  45.00  from holding 3M Company or generate 0.34% return on investment over 90 days.

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

Marubeni Corp ADR  vs.  3M Company

Marubeni Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marubeni Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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

Pair Trading with Marubeni Corp and 3M

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

The idea behind Marubeni Corp ADR and 3M Company 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.