Correlation Between Automatic Data and Martin Marietta

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

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

Diversification Opportunities for Automatic Data and Martin Marietta

0.61

Correlation Coefficient

Automatic Data  Martin Marietta

Poor diversification

The 3 months correlation between Automatic and Martin is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Martin Marietta Materials, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Marietta Mate and Automatic Data 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 Automatic Data Processing 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 Mate has no effect on the direction of Automatic Data i.e., Automatic Data and Martin Marietta go up and down completely randomly.

Pair Corralation between Automatic Data and Martin Marietta

Assuming the 90 days trading horizon Automatic Data Processing is expected to under-perform the Martin Marietta. In addition to that, Automatic Data is 10.88 times more volatile than Martin Marietta Materials,. It trades about -0.07 of its total potential returns per unit of risk. Martin Marietta Materials, is currently generating about -0.11 per unit of volatility. If you would invest  56,187  in Martin Marietta Materials, on December 26, 2024 and sell it today you would lose (499.00) from holding Martin Marietta Materials, or give up 0.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Automatic Data Processing  vs.  Martin Marietta Materials,

Automatic Data Processing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Automatic Data Processing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Automatic Data is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Martin Marietta Mate

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. Despite somewhat strong essential indicators, Martin Marietta is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Automatic Data and Martin Marietta

The main advantage of trading using opposite Automatic Data and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data 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 Automatic Data Processing 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.