Correlation Between Martin Marietta and Pfizer

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

Diversification Opportunities for Martin Marietta and Pfizer

-0.53

Correlation Coefficient

Martin Marietta  Pfizer

Excellent diversification

The 3 months correlation between Martin and Pfizer is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc 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 Pfizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfizer Inc has no effect on the direction of Martin Marietta i.e., Martin Marietta and Pfizer go up and down completely randomly.

Pair Corralation between Martin Marietta and Pfizer

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 1.11 times more return on investment than Pfizer. However, Martin Marietta is 1.11 times more volatile than Pfizer Inc. It trades about -0.03 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.04 per unit of risk. If you would invest  1,145,038  in Martin Marietta Materials on October 25, 2024 and sell it today you would lose (47,489) from holding Martin Marietta Materials or give up 4.15% of portfolio value over 90 days.

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

Martin Marietta Materials  vs.  Pfizer 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.

Pfizer Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfizer Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Pfizer 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 Pfizer

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

The idea behind Martin Marietta Materials and Pfizer 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..