Correlation Between Martin Marietta and China Resources

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

Diversification Opportunities for Martin Marietta and China Resources

0.15

Correlation Coefficient

Martin Marietta  China Resources

Average diversification

The 3 months correlation between Martin and China is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and China Resources Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Cement 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Cement has no effect on the direction of Martin Marietta i.e., Martin Marietta and China Resources go up and down completely randomly.

Pair Corralation between Martin Marietta and China Resources

Considering the 90-day investment horizon Martin Marietta is expected to generate 6.6 times less return on investment than China Resources. But when comparing it to its historical volatility, Martin Marietta Materials is 3.42 times less risky than China Resources. It trades about 0.05 of its potential returns per unit of risk. China Resources Cement is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  555.00  in China Resources Cement on September 14, 2024 and sell it today you would earn a total of  149.00  from holding China Resources Cement or generate 26.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Martin Marietta Materials  vs.  China Resources Cement

Martin Marietta Materials

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Martin Marietta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

China Resources Cement

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Cement are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, China Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Martin Marietta and China Resources

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

The idea behind Martin Marietta Materials and China Resources Cement 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.