Correlation Between Aeorema Communications and Martin Marietta

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

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

Diversification Opportunities for Aeorema Communications and Martin Marietta

0.6

Correlation Coefficient

Aeorema Communications  Martin Marietta

Poor diversification

The 3 months correlation between Aeorema and Martin is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc 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 Aeorema Communications 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 Aeorema Communications Plc 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 Aeorema Communications i.e., Aeorema Communications and Martin Marietta go up and down completely randomly.

Pair Corralation between Aeorema Communications and Martin Marietta

Assuming the 90 days trading horizon Aeorema Communications Plc is expected to generate 0.97 times more return on investment than Martin Marietta. However, Aeorema Communications Plc is 1.03 times less risky than Martin Marietta. It trades about -0.11 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about -0.22 per unit of risk. If you would invest  5,182  in Aeorema Communications Plc on November 29, 2024 and sell it today you would lose (532.00) from holding Aeorema Communications Plc or give up 10.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	88.52%
Values	Daily Returns

Aeorema Communications Plc  vs.  Martin Marietta Materials

Aeorema Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aeorema Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Aeorema Communications and Martin Marietta

The main advantage of trading using opposite Aeorema Communications and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema Communications 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 Aeorema Communications Plc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.