Correlation Between TopBuild Corp and Martin Marietta

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

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

Diversification Opportunities for TopBuild Corp and Martin Marietta

0.75

Correlation Coefficient

TopBuild Corp  Martin Marietta

Poor diversification

The 3 months correlation between TopBuild and Martin is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding TopBuild Corp 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 TopBuild Corp 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 TopBuild Corp 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 TopBuild Corp i.e., TopBuild Corp and Martin Marietta go up and down completely randomly.

Pair Corralation between TopBuild Corp and Martin Marietta

Assuming the 90 days trading horizon TopBuild Corp is expected to under-perform the Martin Marietta. In addition to that, TopBuild Corp is 1.28 times more volatile than Martin Marietta Materials. It trades about -0.17 of its total potential returns per unit of risk. Martin Marietta Materials is currently generating about -0.1 per unit of volatility. If you would invest  1,113,023  in Martin Marietta Materials on December 30, 2024 and sell it today you would lose (132,181) from holding Martin Marietta Materials or give up 11.88% of portfolio value over 90 days.

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

TopBuild Corp  vs.  Martin Marietta Materials

TopBuild Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days TopBuild Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with TopBuild Corp and Martin Marietta

The main advantage of trading using opposite TopBuild Corp and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TopBuild Corp 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 TopBuild Corp 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.