Correlation Between Martin Marietta and DFS Furniture

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

Diversification Opportunities for Martin Marietta and DFS Furniture

-0.4

Correlation Coefficient

Martin Marietta  DFS Furniture

Very good diversification

The 3 months correlation between Martin and DFS is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and DFS Furniture PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DFS Furniture PLC 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 DFS Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DFS Furniture PLC has no effect on the direction of Martin Marietta i.e., Martin Marietta and DFS Furniture go up and down completely randomly.

Pair Corralation between Martin Marietta and DFS Furniture

Assuming the 90 days trading horizon Martin Marietta is expected to generate 7.33 times less return on investment than DFS Furniture. In addition to that, Martin Marietta is 1.02 times more volatile than DFS Furniture PLC. It trades about 0.01 of its total potential returns per unit of risk. DFS Furniture PLC is currently generating about 0.06 per unit of volatility. If you would invest  13,400  in DFS Furniture PLC on October 8, 2024 and sell it today you would earn a total of  760.00  from holding DFS Furniture PLC or generate 5.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

Martin Marietta Materials  vs.  DFS Furniture PLC

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

DFS Furniture PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, DFS Furniture may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Martin Marietta and DFS Furniture

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

The idea behind Martin Marietta Materials and DFS Furniture PLC 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.