Correlation Between Martin Marietta and Meta Platforms

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

Diversification Opportunities for Martin Marietta and Meta Platforms

0.36

Correlation Coefficient

Martin Marietta  Meta Platforms

Weak diversification

The 3 months correlation between Martin and Meta is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Martin Marietta i.e., Martin Marietta and Meta Platforms go up and down completely randomly.

Pair Corralation between Martin Marietta and Meta Platforms

Assuming the 90 days trading horizon Martin Marietta is expected to generate 1.26 times less return on investment than Meta Platforms. In addition to that, Martin Marietta is 1.08 times more volatile than Meta Platforms. It trades about 0.06 of its total potential returns per unit of risk. Meta Platforms is currently generating about 0.08 per unit of volatility. If you would invest  1,127,954  in Meta Platforms on October 3, 2024 and sell it today you would earn a total of  85,842  from holding Meta Platforms or generate 7.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Martin Marietta Materials  vs.  Meta Platforms

Martin Marietta Materials

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Martin Marietta may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Meta Platforms

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Meta Platforms may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Martin Marietta and Meta Platforms

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

The idea behind Martin Marietta Materials and Meta Platforms 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.