Correlation Between Martin Marietta and Banco Santander

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

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

Diversification Opportunities for Martin Marietta and Banco Santander

-0.65

Correlation Coefficient

Martin Marietta  Banco Santander

Excellent diversification

The 3 months correlation between Martin and Banco is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials, and Banco Santander Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander Chile and Martin Marietta 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 Martin Marietta Materials, are associated (or correlated) with Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander Chile has no effect on the direction of Martin Marietta i.e., Martin Marietta and Banco Santander go up and down completely randomly.

Pair Corralation between Martin Marietta and Banco Santander

Assuming the 90 days trading horizon Martin Marietta Materials, is expected to under-perform the Banco Santander. But the stock apears to be less risky and, when comparing its historical volatility, Martin Marietta Materials, is 8.75 times less risky than Banco Santander. The stock trades about -0.11 of its potential returns per unit of risk. The Banco Santander Chile is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  5,868  in Banco Santander Chile on December 24, 2024 and sell it today you would earn a total of  712.00  from holding Banco Santander Chile or generate 12.13% return on investment over 90 days.

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

Martin Marietta Materials,  vs.  Banco Santander Chile

Martin Marietta Mate

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. Despite somewhat strong essential indicators, Martin Marietta is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Banco Santander Chile

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander Chile are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Banco Santander sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Martin Marietta and Banco Santander

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

The idea behind Martin Marietta Materials, and Banco Santander Chile 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.