Correlation Between Martin Marietta and JetBlue Airways

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

Diversification Opportunities for Martin Marietta and JetBlue Airways

-0.79

Correlation Coefficient

Martin Marietta  JetBlue Airways

Pay attention - limited upside

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

Pair Corralation between Martin Marietta and JetBlue Airways

Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the JetBlue Airways. But the stock apears to be less risky and, when comparing its historical volatility, Martin Marietta Materials is 2.94 times less risky than JetBlue Airways. The stock trades about -0.03 of its potential returns per unit of risk. The JetBlue Airways is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  14,200  in JetBlue Airways on October 25, 2024 and sell it today you would earn a total of  2,100  from holding JetBlue Airways or generate 14.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Martin Marietta Materials  vs.  JetBlue Airways

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.

JetBlue Airways

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JetBlue Airways are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, JetBlue Airways showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Martin Marietta and JetBlue Airways

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

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