Correlation Between Martin Marietta and Royal Caribbean

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

Diversification Opportunities for Martin Marietta and Royal Caribbean

0.71

Correlation Coefficient

Martin Marietta  Royal Caribbean

Poor diversification

The 3 months correlation between Martin and Royal is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Royal Caribbean Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Caribbean Group 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 Royal Caribbean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Caribbean Group has no effect on the direction of Martin Marietta i.e., Martin Marietta and Royal Caribbean go up and down completely randomly.

Pair Corralation between Martin Marietta and Royal Caribbean

Assuming the 90 days trading horizon Martin Marietta is expected to generate 9.97 times less return on investment than Royal Caribbean. But when comparing it to its historical volatility, Martin Marietta Materials is 1.29 times less risky than Royal Caribbean. It trades about 0.02 of its potential returns per unit of risk. Royal Caribbean Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  378,520  in Royal Caribbean Group on October 10, 2024 and sell it today you would earn a total of  77,480  from holding Royal Caribbean Group or generate 20.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Martin Marietta Materials  vs.  Royal Caribbean Group

Martin Marietta Materials

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Royal Caribbean Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Caribbean Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Royal Caribbean showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Martin Marietta and Royal Caribbean

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

The idea behind Martin Marietta Materials and Royal Caribbean Group 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.