Correlation Between Martin Marietta and Walmart

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

Diversification Opportunities for Martin Marietta and Walmart

0.68

Correlation Coefficient

Martin Marietta  Walmart

Poor diversification

The 3 months correlation between Martin and Walmart is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Martin Marietta i.e., Martin Marietta and Walmart go up and down completely randomly.

Pair Corralation between Martin Marietta and Walmart

Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the Walmart. In addition to that, Martin Marietta is 1.01 times more volatile than Walmart. It trades about -0.1 of its total potential returns per unit of risk. Walmart is currently generating about -0.05 per unit of volatility. If you would invest  186,916  in Walmart on December 29, 2024 and sell it today you would lose (13,362) from holding Walmart or give up 7.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Martin Marietta Materials  vs.  Walmart

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 latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Walmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Martin Marietta and Walmart

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

The idea behind Martin Marietta Materials and Walmart 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.