Correlation Between Alerian Energy and MARTIN

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

By analyzing existing cross correlation between Alerian Energy Infrastructure and MARTIN MARIETTA MATLS, you can compare the effects of market volatilities on Alerian Energy and MARTIN 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 Alerian Energy with a short position of MARTIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alerian Energy and MARTIN.

Diversification Opportunities for Alerian Energy and MARTIN

-0.46

Correlation Coefficient

Alerian Energy  MARTIN

Very good diversification

The 3 months correlation between Alerian and MARTIN is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Alerian Energy Infrastructure and MARTIN MARIETTA MATLS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARTIN MARIETTA MATLS and Alerian Energy 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 Alerian Energy Infrastructure are associated (or correlated) with MARTIN. 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 MATLS has no effect on the direction of Alerian Energy i.e., Alerian Energy and MARTIN go up and down completely randomly.

Pair Corralation between Alerian Energy and MARTIN

Given the investment horizon of 90 days Alerian Energy Infrastructure is expected to generate 1.93 times more return on investment than MARTIN. However, Alerian Energy is 1.93 times more volatile than MARTIN MARIETTA MATLS. It trades about 0.11 of its potential returns per unit of risk. MARTIN MARIETTA MATLS is currently generating about 0.02 per unit of risk. If you would invest  1,862  in Alerian Energy Infrastructure on September 24, 2024 and sell it today you would earn a total of  1,198  from holding Alerian Energy Infrastructure or generate 64.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	62.85%
Values	Daily Returns

Alerian Energy Infrastructure  vs.  MARTIN MARIETTA MATLS

Alerian Energy Infra

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alerian Energy Infrastructure are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Alerian Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MARTIN MARIETTA MATLS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Alerian Energy and MARTIN

The main advantage of trading using opposite Alerian Energy and MARTIN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alerian Energy position performs unexpectedly, MARTIN 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 will offset losses from the drop in MARTIN's long position.

The idea behind Alerian Energy Infrastructure and MARTIN MARIETTA MATLS 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.