Correlation Between Amazon and Martin Marietta
Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and Martin Marietta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Martin Marietta Materials,, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Martin Marietta.
Diversification Opportunities for Amazon and Martin Marietta
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and Martin is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc 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 Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and Martin Marietta go up and down completely randomly.
Pair Corralation between Amazon and Martin Marietta
Assuming the 90 days trading horizon Amazon Inc is expected to generate 124.02 times more return on investment than Martin Marietta. However, Amazon is 124.02 times more volatile than Martin Marietta Materials,. It trades about 0.3 of its potential returns per unit of risk. Martin Marietta Materials, is currently generating about 0.13 per unit of risk. If you would invest 5,040 in Amazon Inc on October 8, 2024 and sell it today you would earn a total of 1,845 from holding Amazon Inc or generate 36.61% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Amazon Inc vs. Martin Marietta Materials,
Performance |
Timeline |
Amazon Inc |
Martin Marietta Mate |
Amazon and Martin Marietta Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Amazon and Martin Marietta
The main advantage of trading using opposite Amazon and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.Amazon vs. METISA Metalrgica Timboense | Amazon vs. MAHLE Metal Leve | Amazon vs. Pure Storage, | Amazon vs. Westinghouse Air Brake |
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Check out your portfolio center.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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