Correlation Between 3M and FIBRA Storage

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

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

Diversification Opportunities for 3M and FIBRA Storage

0.43

Correlation Coefficient

3M  FIBRA Storage

Very weak diversification

The 3 months correlation between 3M and FIBRA is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and FIBRA Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIBRA Storage 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 FIBRA Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIBRA Storage has no effect on the direction of 3M i.e., 3M and FIBRA Storage go up and down completely randomly.

Pair Corralation between 3M and FIBRA Storage

Assuming the 90 days trading horizon 3M is expected to generate 5.15 times less return on investment than FIBRA Storage. In addition to that, 3M is 1.7 times more volatile than FIBRA Storage. It trades about 0.04 of its total potential returns per unit of risk. FIBRA Storage is currently generating about 0.32 per unit of volatility. If you would invest  1,480  in FIBRA Storage on September 20, 2024 and sell it today you would earn a total of  319.00  from holding FIBRA Storage or generate 21.55% return on investment over 90 days.

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

3M Company  vs.  FIBRA Storage

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 fairly strong primary indicators, 3M is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FIBRA Storage

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FIBRA Storage are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, FIBRA Storage exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 3M and FIBRA Storage

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

The idea behind 3M Company and FIBRA Storage 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.