Correlation Between Martin Marietta and Petrleo Brasileiro

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

Diversification Opportunities for Martin Marietta and Petrleo Brasileiro

-0.06

Correlation Coefficient

Martin Marietta  Petrleo Brasileiro

Good diversification

The 3 months correlation between Martin and Petrleo is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Petrleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrleo Brasileiro 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 Petrleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrleo Brasileiro has no effect on the direction of Martin Marietta i.e., Martin Marietta and Petrleo Brasileiro go up and down completely randomly.

Pair Corralation between Martin Marietta and Petrleo Brasileiro

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 1.24 times more return on investment than Petrleo Brasileiro. However, Martin Marietta is 1.24 times more volatile than Petrleo Brasileiro SA. It trades about 0.08 of its potential returns per unit of risk. Petrleo Brasileiro SA is currently generating about 0.02 per unit of risk. If you would invest  1,017,723  in Martin Marietta Materials on September 17, 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 Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Martin Marietta Materials  vs.  Petrleo Brasileiro SA

Martin Marietta Materials

Risk-Adjusted Performance

6 of 100

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 weak primary indicators, Martin Marietta may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Petrleo Brasileiro

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Martin Marietta and Petrleo Brasileiro

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

The idea behind Martin Marietta Materials and Petrleo Brasileiro SA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.