Correlation Between Eagle Materials and Martin Marietta

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

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

Diversification Opportunities for Eagle Materials and Martin Marietta

0.98

Correlation Coefficient

Eagle Materials  Martin Marietta

Almost no diversification

The 3 months correlation between Eagle and Martin is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials 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 Eagle Materials 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 Eagle Materials 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 Eagle Materials i.e., Eagle Materials and Martin Marietta go up and down completely randomly.

Pair Corralation between Eagle Materials and Martin Marietta

Considering the 90-day investment horizon Eagle Materials is expected to under-perform the Martin Marietta. In addition to that, Eagle Materials is 1.27 times more volatile than Martin Marietta Materials. It trades about -0.31 of its total potential returns per unit of risk. Martin Marietta Materials is currently generating about -0.26 per unit of volatility. If you would invest  59,921  in Martin Marietta Materials on November 28, 2024 and sell it today you would lose (10,892) from holding Martin Marietta Materials or give up 18.18% of portfolio value over 90 days.

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

Eagle Materials  vs.  Martin Marietta Materials

Eagle Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eagle Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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 inconsistent performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Eagle Materials and Martin Marietta

The main advantage of trading using opposite Eagle Materials and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials 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 Eagle Materials 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.