Correlation Between Martin Marietta and Loma Negra

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

Diversification Opportunities for Martin Marietta and Loma Negra

0.63

Correlation Coefficient

Martin Marietta  Loma Negra

Poor diversification

The 3 months correlation between Martin and Loma is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Loma Negra Compania in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loma Negra Compania 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 Loma Negra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loma Negra Compania has no effect on the direction of Martin Marietta i.e., Martin Marietta and Loma Negra go up and down completely randomly.

Pair Corralation between Martin Marietta and Loma Negra

Considering the 90-day investment horizon Martin Marietta Materials is expected to under-perform the Loma Negra. But the stock apears to be less risky and, when comparing its historical volatility, Martin Marietta Materials is 2.23 times less risky than Loma Negra. The stock trades about -0.09 of its potential returns per unit of risk. The Loma Negra Compania is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,241  in Loma Negra Compania on December 27, 2024 and sell it today you would lose (111.00) from holding Loma Negra Compania or give up 8.94% 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.  Loma Negra Compania

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 inconsistent performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Loma Negra Compania

Risk-Adjusted Performance

Very Weak

Over the last 90 days Loma Negra Compania has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Loma Negra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Martin Marietta and Loma Negra

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

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