Correlation Between Martin Marietta and Malvern International

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

Diversification Opportunities for Martin Marietta and Malvern International

0.07

Correlation Coefficient

Martin Marietta  Malvern International

Significant diversification

The 3 months correlation between Martin and Malvern is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Malvern International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malvern International 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 Malvern International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malvern International has no effect on the direction of Martin Marietta i.e., Martin Marietta and Malvern International go up and down completely randomly.

Pair Corralation between Martin Marietta and Malvern International

Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the Malvern International. But the stock apears to be less risky and, when comparing its historical volatility, Martin Marietta Materials is 1.12 times less risky than Malvern International. The stock trades about -0.07 of its potential returns per unit of risk. The Malvern International is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,050  in Malvern International on December 24, 2024 and sell it today you would earn a total of  25.00  from holding Malvern International or generate 1.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	87.1%
Values	Daily Returns

Martin Marietta Materials  vs.  Malvern International

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.

Malvern International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Malvern International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Malvern International is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Martin Marietta and Malvern International

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

The idea behind Martin Marietta Materials and Malvern International 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.