Correlation Between Martin Marietta and Berkshire Hathaway

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

Diversification Opportunities for Martin Marietta and Berkshire Hathaway

MartinBerkshireDiversified AwayMartinBerkshireDiversified Away100%
0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Martin and Berkshire is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway 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 Berkshire Hathaway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkshire Hathaway has no effect on the direction of Martin Marietta i.e., Martin Marietta and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Martin Marietta and Berkshire Hathaway

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 1.43 times more return on investment than Berkshire Hathaway. However, Martin Marietta is 1.43 times more volatile than Berkshire Hathaway. It trades about 0.09 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.05 per unit of risk. If you would invest  1,017,723  in Martin Marietta Materials on September 21, 2024 and sell it today you would earn a total of  97,134  from holding Martin Marietta Materials or generate 9.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Martin Marietta Materials  vs.  Berkshire Hathaway

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 05101520
JavaScript chart by amCharts 3.21.15MLM BRKB
       Timeline  
Martin Marietta Materials 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, Martin Marietta may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec10,50011,00011,50012,000
Berkshire Hathaway 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Berkshire Hathaway is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec8,8009,0009,2009,4009,6009,80010,00010,200

Martin Marietta and Berkshire Hathaway Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.96-4.5-3.03-1.57-0.09941.432.954.486.017.54 0.050.100.150.20
JavaScript chart by amCharts 3.21.15MLM BRKB
       Returns  

Pair Trading with Martin Marietta and Berkshire Hathaway

The main advantage of trading using opposite Martin Marietta and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, Berkshire Hathaway 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 Berkshire Hathaway will offset losses from the drop in Berkshire Hathaway's long position.
The idea behind Martin Marietta Materials and Berkshire Hathaway 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 Stocks Directory module to find actively traded stocks across global markets.

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