Correlation Between Martin Marietta and Eco Animal

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

Diversification Opportunities for Martin Marietta and Eco Animal

0.79

Correlation Coefficient

Martin Marietta  Eco Animal

Poor diversification

The 3 months correlation between Martin and Eco is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Eco Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Animal Health 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 Eco Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Animal Health has no effect on the direction of Martin Marietta i.e., Martin Marietta and Eco Animal go up and down completely randomly.

Pair Corralation between Martin Marietta and Eco Animal

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 0.84 times more return on investment than Eco Animal. However, Martin Marietta Materials is 1.18 times less risky than Eco Animal. It trades about -0.08 of its potential returns per unit of risk. Eco Animal Health is currently generating about -0.14 per unit of risk. If you would invest  52,730  in Martin Marietta Materials on December 23, 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	84.13%
Values	Daily Returns

Martin Marietta Materials  vs.  Eco Animal Health

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 unsteady 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.

Eco Animal Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eco Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Martin Marietta and Eco Animal

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

The idea behind Martin Marietta Materials and Eco Animal Health 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 Transaction History module to view history of all your transactions and understand their impact on performance.