Correlation Between Martin Marietta and Holcim

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

Diversification Opportunities for Martin Marietta and Holcim

0.43

Correlation Coefficient

Martin Marietta  Holcim

Very weak diversification

The 3 months correlation between Martin and Holcim is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Holcim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holcim 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 Holcim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holcim has no effect on the direction of Martin Marietta i.e., Martin Marietta and Holcim go up and down completely randomly.

Pair Corralation between Martin Marietta and Holcim

Considering the 90-day investment horizon Martin Marietta Materials is expected to under-perform the Holcim. But the stock apears to be less risky and, when comparing its historical volatility, Martin Marietta Materials is 1.56 times less risky than Holcim. The stock trades about -0.37 of its potential returns per unit of risk. The Holcim is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  9,705  in Holcim on September 13, 2024 and sell it today you would earn a total of  605.00  from holding Holcim or generate 6.23% return on investment over 90 days.

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

Martin Marietta Materials  vs.  Holcim

Martin Marietta Materials

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent essential indicators, Martin Marietta may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Holcim

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Holcim are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, Holcim may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Martin Marietta and Holcim

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

The idea behind Martin Marietta Materials and Holcim 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.