Correlation Between Martin Marietta and Universal Health

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

Diversification Opportunities for Martin Marietta and Universal Health

-0.42

Correlation Coefficient

Martin Marietta  Universal Health

Very good diversification

The 3 months correlation between Martin and Universal is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials, and Universal Health Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Ser 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 Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Ser has no effect on the direction of Martin Marietta i.e., Martin Marietta and Universal Health go up and down completely randomly.

Pair Corralation between Martin Marietta and Universal Health

Assuming the 90 days trading horizon Martin Marietta Materials, is expected to generate 0.01 times more return on investment than Universal Health. However, Martin Marietta Materials, is 122.19 times less risky than Universal Health. It trades about 0.13 of its potential returns per unit of risk. Universal Health Services, is currently generating about -0.11 per unit of risk. If you would invest  56,187  in Martin Marietta Materials, on October 23, 2024 and sell it today you would earn a total of  63.00  from holding Martin Marietta Materials, or generate 0.11% return on investment over 90 days.

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

Martin Marietta Materials,  vs.  Universal Health Services,

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.

Universal Health Ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Health Services, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Martin Marietta and Universal Health

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

The idea behind Martin Marietta Materials, and Universal Health Services, 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..