Correlation Between Martin Marietta and Companhia Siderrgica

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

Diversification Opportunities for Martin Marietta and Companhia Siderrgica

0.7

Correlation Coefficient

Martin Marietta  Companhia Siderrgica

Poor diversification

The 3 months correlation between Martin and Companhia is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Companhia Siderrgica Nacional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Siderrgica 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 Companhia Siderrgica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Siderrgica has no effect on the direction of Martin Marietta i.e., Martin Marietta and Companhia Siderrgica go up and down completely randomly.

Pair Corralation between Martin Marietta and Companhia Siderrgica

Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the Companhia Siderrgica. But the stock apears to be less risky and, when comparing its historical volatility, Martin Marietta Materials is 2.16 times less risky than Companhia Siderrgica. The stock trades about -0.19 of its potential returns per unit of risk. The Companhia Siderrgica Nacional is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  3,807  in Companhia Siderrgica Nacional on December 4, 2024 and sell it today you would lose (794.00) from holding Companhia Siderrgica Nacional or give up 20.86% of portfolio value over 90 days.

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

Martin Marietta Materials  vs.  Companhia Siderrgica Nacional

Martin Marietta Materials

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Companhia Siderrgica

Risk-Adjusted Performance

Very Weak

Over the last 90 days Companhia Siderrgica Nacional has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Martin Marietta and Companhia Siderrgica

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

The idea behind Martin Marietta Materials and Companhia Siderrgica Nacional 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.