Correlation Between Martin Marietta and Fresenius Medical

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

By analyzing existing cross correlation between Martin Marietta Materials and Fresenius Medical Care, you can compare the effects of market volatilities on Martin Marietta and Fresenius Medical 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 Martin Marietta with a short position of Fresenius Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and Fresenius Medical.

Diversification Opportunities for Martin Marietta and Fresenius Medical

-0.19

Correlation Coefficient

Martin Marietta  Fresenius Medical

Good diversification

The 3 months correlation between Martin and Fresenius is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical Care and Martin Marietta 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 Martin Marietta Materials are associated (or correlated) with Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of Martin Marietta i.e., Martin Marietta and Fresenius Medical go up and down completely randomly.

Pair Corralation between Martin Marietta and Fresenius Medical

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 1.69 times more return on investment than Fresenius Medical. However, Martin Marietta is 1.69 times more volatile than Fresenius Medical Care. It trades about 0.19 of its potential returns per unit of risk. Fresenius Medical Care is currently generating about 0.07 per unit of risk. If you would invest  52,818  in Martin Marietta Materials on October 25, 2024 and sell it today you would earn a total of  2,536  from holding Martin Marietta Materials or generate 4.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.95%
Values	Daily Returns

Martin Marietta Materials  vs.  Fresenius Medical Care

Martin Marietta Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Martin Marietta Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Martin Marietta is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Fresenius Medical Care

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fresenius Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Martin Marietta and Fresenius Medical

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

The idea behind Martin Marietta Materials and Fresenius Medical Care 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.