Correlation Between Axfood AB and Martin Marietta

Can any of the company-specific risk be diversified away by investing in both Axfood AB and Martin Marietta 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 Axfood AB and Martin Marietta into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Axfood AB and Martin Marietta Materials, you can compare the effects of market volatilities on Axfood AB and Martin Marietta 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 Axfood AB with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axfood AB and Martin Marietta.

Diversification Opportunities for Axfood AB and Martin Marietta

-0.06

Correlation Coefficient

Axfood AB  Martin Marietta

Good diversification

The 3 months correlation between Axfood and Martin is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Axfood AB and Martin Marietta Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Marietta Materials and Axfood AB 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 Axfood AB are associated (or correlated) with Martin Marietta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Marietta Materials has no effect on the direction of Axfood AB i.e., Axfood AB and Martin Marietta go up and down completely randomly.

Pair Corralation between Axfood AB and Martin Marietta

Assuming the 90 days trading horizon Axfood AB is expected to generate 8.47 times less return on investment than Martin Marietta. But when comparing it to its historical volatility, Axfood AB is 1.21 times less risky than Martin Marietta. It trades about 0.01 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  36,343  in Martin Marietta Materials on October 24, 2024 and sell it today you would earn a total of  18,994  from holding Martin Marietta Materials or generate 52.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.97%
Values	Daily Returns

Axfood AB  vs.  Martin Marietta Materials

Axfood AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axfood AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Axfood AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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

Pair Trading with Axfood AB and Martin Marietta

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

The idea behind Axfood AB and Martin Marietta Materials 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.