Correlation Between Martin Marietta and Disney

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

Diversification Opportunities for Martin Marietta and Disney

0.52

Correlation Coefficient

Martin Marietta  Disney

Very weak diversification

The 3 months correlation between Martin and Disney is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and The Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney 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 Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of Martin Marietta i.e., Martin Marietta and Disney go up and down completely randomly.

Pair Corralation between Martin Marietta and Disney

Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the Disney. In addition to that, Martin Marietta is 2.0 times more volatile than The Walt Disney. It trades about -0.32 of its total potential returns per unit of risk. The Walt Disney is currently generating about -0.09 per unit of volatility. If you would invest  230,976  in The Walt Disney on October 10, 2024 and sell it today you would lose (4,007) from holding The Walt Disney or give up 1.73% of portfolio value over 90 days.

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

Martin Marietta Materials  vs.  The Walt Disney

Martin Marietta Materials

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Martin Marietta is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Walt Disney

Risk-Adjusted Performance

18 of 100

Solid

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

Pair Trading with Martin Marietta and Disney

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

The idea behind Martin Marietta Materials and The Walt Disney 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.