Correlation Between Martin Marietta and Sherborne Investors

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

Diversification Opportunities for Martin Marietta and Sherborne Investors

0.72

Correlation Coefficient

Martin Marietta  Sherborne Investors

Poor diversification

The 3 months correlation between Martin and Sherborne is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Sherborne Investors Guernsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sherborne Investors 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 Sherborne Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sherborne Investors has no effect on the direction of Martin Marietta i.e., Martin Marietta and Sherborne Investors go up and down completely randomly.

Pair Corralation between Martin Marietta and Sherborne Investors

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 2.39 times more return on investment than Sherborne Investors. However, Martin Marietta is 2.39 times more volatile than Sherborne Investors Guernsey. It trades about -0.07 of its potential returns per unit of risk. Sherborne Investors Guernsey is currently generating about -0.2 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	87.1%
Values	Daily Returns

Martin Marietta Materials  vs.  Sherborne Investors Guernsey

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.

Sherborne Investors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sherborne Investors Guernsey 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.

Pair Trading with Martin Marietta and Sherborne Investors

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

The idea behind Martin Marietta Materials and Sherborne Investors Guernsey 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.