Correlation Between Air Products and Martin Marietta
Can any of the company-specific risk be diversified away by investing in both Air Products and Martin Marietta 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 Air Products and Martin Marietta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products Chemicals and Martin Marietta Materials, you can compare the effects of market volatilities on Air Products and Martin Marietta 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 Air Products with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Martin Marietta.
Diversification Opportunities for Air Products and Martin Marietta
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Martin is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Martin Marietta Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Marietta Materials and Air Products 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 Air Products Chemicals are associated (or correlated) with Martin Marietta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Marietta Materials has no effect on the direction of Air Products i.e., Air Products and Martin Marietta go up and down completely randomly.
Pair Corralation between Air Products and Martin Marietta
Assuming the 90 days trading horizon Air Products is expected to generate 1.05 times less return on investment than Martin Marietta. In addition to that, Air Products is 3.11 times more volatile than Martin Marietta Materials. It trades about 0.02 of its total potential returns per unit of risk. Martin Marietta Materials is currently generating about 0.08 per unit of volatility. If you would invest 33,618 in Martin Marietta Materials on September 14, 2024 and sell it today you would earn a total of 22,750 from holding Martin Marietta Materials or generate 67.67% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 90.93% |
Values | Daily Returns |
Air Products Chemicals vs. Martin Marietta Materials
Performance |
Timeline |
Air Products Chemicals |
Martin Marietta Materials |
Air Products and Martin Marietta Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Air Products and Martin Marietta
The main advantage of trading using opposite Air Products and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, Martin Marietta 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 Martin Marietta will offset losses from the drop in Martin Marietta's long position.Air Products vs. Made Tech Group | Air Products vs. Datalogic | Air Products vs. Allianz Technology Trust | Air Products vs. Extra Space Storage |
Martin Marietta vs. Playtech Plc | Martin Marietta vs. Check Point Software | Martin Marietta vs. L3Harris Technologies | Martin Marietta vs. Ion Beam Applications |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
Risk-Return Analysis View associations between returns expected from investment and the risk you assume |