Correlation Between Martin Marietta and Alphabet

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

Diversification Opportunities for Martin Marietta and Alphabet

-0.76

Correlation Coefficient

Martin Marietta  Alphabet

Pay attention - limited upside

The 3 months correlation between Martin and Alphabet is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Alphabet Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet has no effect on the direction of Martin Marietta i.e., Martin Marietta and Alphabet go up and down completely randomly.

Pair Corralation between Martin Marietta and Alphabet

Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the Alphabet. In addition to that, Martin Marietta is 1.62 times more volatile than Alphabet Inc. It trades about -0.03 of its total potential returns per unit of risk. Alphabet Inc is currently generating about 0.14 per unit of volatility. If you would invest  396,595  in Alphabet Inc on October 25, 2024 and sell it today you would earn a total of  12,731  from holding Alphabet Inc or generate 3.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Martin Marietta Materials  vs.  Alphabet Inc

Martin Marietta Materials

Risk-Adjusted Performance

0 of 100

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 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.

Alphabet

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Alphabet showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Martin Marietta and Alphabet

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

The idea behind Martin Marietta Materials and Alphabet Inc 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.