Correlation Between 3M and Marubeni

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

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

Diversification Opportunities for 3M and Marubeni

0.37

Correlation Coefficient

3M  Marubeni

Weak diversification

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

Pair Corralation between 3M and Marubeni

Considering the 90-day investment horizon 3M is expected to generate 8.56 times less return on investment than Marubeni. But when comparing it to its historical volatility, 3M Company is 3.02 times less risky than Marubeni. It trades about 0.01 of its potential returns per unit of risk. Marubeni is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,548  in Marubeni on September 5, 2024 and sell it today you would earn a total of  40.00  from holding Marubeni or generate 2.58% return on investment over 90 days.

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

3M Company  vs.  Marubeni

3M Company

Risk-Adjusted Performance

0 of 100

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.

Marubeni

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marubeni are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Marubeni may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with 3M and Marubeni

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

The idea behind 3M Company and Marubeni 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.