Correlation Between Martin Marietta and Charles Schwab

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

Diversification Opportunities for Martin Marietta and Charles Schwab

0.62

Correlation Coefficient

Martin Marietta  Charles Schwab

Poor diversification

The 3 months correlation between Martin and Charles is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and The Charles Schwab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab 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 Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab has no effect on the direction of Martin Marietta i.e., Martin Marietta and Charles Schwab go up and down completely randomly.

Pair Corralation between Martin Marietta and Charles Schwab

Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the Charles Schwab. But the stock apears to be less risky and, when comparing its historical volatility, Martin Marietta Materials is 1.07 times less risky than Charles Schwab. The stock trades about -0.03 of its potential returns per unit of risk. The The Charles Schwab is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  147,000  in The Charles Schwab on October 23, 2024 and sell it today you would earn a total of  11,969  from holding The Charles Schwab or generate 8.14% 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.  The Charles Schwab

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.

Charles Schwab

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Charles Schwab are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Charles Schwab showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Martin Marietta and Charles Schwab

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

The idea behind Martin Marietta Materials and The Charles Schwab 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.