Correlation Between Lumia and MARTIN

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

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

Diversification Opportunities for Lumia and MARTIN

-0.28

Correlation Coefficient

Lumia  MARTIN

Very good diversification

The 3 months correlation between Lumia and MARTIN is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lumia 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 Lumia 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 Lumia 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 Lumia i.e., Lumia and MARTIN go up and down completely randomly.

Pair Corralation between Lumia and MARTIN

Assuming the 90 days trading horizon Lumia is expected to under-perform the MARTIN. In addition to that, Lumia is 5.03 times more volatile than MARTIN MARIETTA MATLS. It trades about -0.37 of its total potential returns per unit of risk. MARTIN MARIETTA MATLS is currently generating about -0.06 per unit of volatility. If you would invest  8,374  in MARTIN MARIETTA MATLS on October 12, 2024 and sell it today you would lose (86.00) from holding MARTIN MARIETTA MATLS or give up 1.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.14%
Values	Daily Returns

Lumia  vs.  MARTIN MARIETTA MATLS

Lumia

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lumia are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Lumia exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lumia and MARTIN

The main advantage of trading using opposite Lumia and MARTIN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia 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 Lumia 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.