Correlation Between Martin Marietta and Canadian General

Can any of the company-specific risk be diversified away by investing in both Martin Marietta and Canadian General 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 Canadian General 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 Canadian General Investments, you can compare the effects of market volatilities on Martin Marietta and Canadian General 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 Canadian General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and Canadian General.

Diversification Opportunities for Martin Marietta and Canadian General

0.7

Correlation Coefficient

Martin Marietta  Canadian General

Poor diversification

The 3 months correlation between Martin and Canadian is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Canadian General Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian General Inv 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 Canadian General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian General Inv has no effect on the direction of Martin Marietta i.e., Martin Marietta and Canadian General go up and down completely randomly.

Pair Corralation between Martin Marietta and Canadian General

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 0.93 times more return on investment than Canadian General. However, Martin Marietta Materials is 1.08 times less risky than Canadian General. It trades about -0.08 of its potential returns per unit of risk. Canadian General Investments is currently generating about -0.1 per unit of risk. If you would invest  52,730  in Martin Marietta Materials on December 24, 2024 and sell it today you would lose (4,065) from holding Martin Marietta Materials or give up 7.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.48%
Values	Daily Returns

Martin Marietta Materials  vs.  Canadian General Investments

Martin Marietta Materials

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Canadian General Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian General Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Martin Marietta and Canadian General

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

The idea behind Martin Marietta Materials and Canadian General Investments 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.