Correlation Between Martin Marietta and KLA

Can any of the company-specific risk be diversified away by investing in both Martin Marietta and KLA 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 KLA 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 KLA Corporation, you can compare the effects of market volatilities on Martin Marietta and KLA 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 KLA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and KLA.

Diversification Opportunities for Martin Marietta and KLA

0.07

Correlation Coefficient

Martin Marietta  KLA

Significant diversification

The 3 months correlation between Martin and KLA is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials, and KLA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Corporation 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 KLA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Corporation has no effect on the direction of Martin Marietta i.e., Martin Marietta and KLA go up and down completely randomly.

Pair Corralation between Martin Marietta and KLA

Assuming the 90 days trading horizon Martin Marietta is expected to generate 1.61 times less return on investment than KLA. But when comparing it to its historical volatility, Martin Marietta Materials, is 1.46 times less risky than KLA. It trades about 0.06 of its potential returns per unit of risk. KLA Corporation is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  53,273  in KLA Corporation on October 11, 2024 and sell it today you would earn a total of  51,194  from holding KLA Corporation or generate 96.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.37%
Values	Daily Returns

Martin Marietta Materials,  vs.  KLA Corp.

Martin Marietta Mate

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials, are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. 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.

KLA Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Martin Marietta and KLA

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

The idea behind Martin Marietta Materials, and KLA Corporation 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.