Correlation Between Martin Marietta and Xiaomi

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

Diversification Opportunities for Martin Marietta and Xiaomi

-0.72

Correlation Coefficient

Martin Marietta  Xiaomi

Pay attention - limited upside

The 3 months correlation between Martin and Xiaomi is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Xiaomi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi 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 Xiaomi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiaomi has no effect on the direction of Martin Marietta i.e., Martin Marietta and Xiaomi go up and down completely randomly.

Pair Corralation between Martin Marietta and Xiaomi

Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the Xiaomi. But the stock apears to be less risky and, when comparing its historical volatility, Martin Marietta Materials is 2.48 times less risky than Xiaomi. The stock trades about -0.11 of its potential returns per unit of risk. The Xiaomi is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  8,100  in Xiaomi on December 23, 2024 and sell it today you would earn a total of  6,700  from holding Xiaomi or generate 82.72% 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.  Xiaomi

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 weak performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Xiaomi

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xiaomi are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Xiaomi displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Martin Marietta and Xiaomi

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

The idea behind Martin Marietta Materials and Xiaomi 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.