Correlation Between Martin Marietta and TopBuild Corp

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

Diversification Opportunities for Martin Marietta and TopBuild Corp

0.75

Correlation Coefficient

Martin Marietta  TopBuild Corp

Poor diversification

The 3 months correlation between Martin and TopBuild is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and TopBuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TopBuild Corp 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 TopBuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TopBuild Corp has no effect on the direction of Martin Marietta i.e., Martin Marietta and TopBuild Corp go up and down completely randomly.

Pair Corralation between Martin Marietta and TopBuild Corp

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 0.78 times more return on investment than TopBuild Corp. However, Martin Marietta Materials is 1.28 times less risky than TopBuild Corp. It trades about -0.1 of its potential returns per unit of risk. TopBuild Corp is currently generating about -0.17 per unit of risk. If you would invest  1,113,023  in Martin Marietta Materials on December 30, 2024 and sell it today you would lose (132,181) from holding Martin Marietta Materials or give up 11.88% of portfolio value over 90 days.

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

Martin Marietta Materials  vs.  TopBuild Corp

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 latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

TopBuild Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days TopBuild Corp 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 fundamental 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.

Pair Trading with Martin Marietta and TopBuild Corp

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

The idea behind Martin Marietta Materials and TopBuild Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.