Correlation Between Disney and Martin Marietta

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

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

Diversification Opportunities for Disney and Martin Marietta

0.56

Correlation Coefficient

Disney  Martin Marietta

Very weak diversification

The 3 months correlation between Disney and Martin is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding The Walt Disney 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 Disney 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 The Walt Disney 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 Disney i.e., Disney and Martin Marietta go up and down completely randomly.

Pair Corralation between Disney and Martin Marietta

Assuming the 90 days trading horizon The Walt Disney is expected to generate 0.51 times more return on investment than Martin Marietta. However, The Walt Disney is 1.95 times less risky than Martin Marietta. It trades about -0.12 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about -0.32 per unit of risk. If you would invest  228,885  in The Walt Disney on October 11, 2024 and sell it today you would lose (5,385) from holding The Walt Disney or give up 2.35% of portfolio value over 90 days.

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

The Walt Disney  vs.  Martin Marietta Materials

Walt Disney

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Walt Disney are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Disney showed solid returns over the last few months and may actually be approaching a breakup point.

Martin Marietta Materials

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary 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 Disney and Martin Marietta

The main advantage of trading using opposite Disney and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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 The Walt Disney 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.