Correlation Between Martin Marietta and United States

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

Diversification Opportunities for Martin Marietta and United States

0.87

Correlation Coefficient

Martin Marietta  United States

Very poor diversification

The 3 months correlation between Martin and United is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and United States Lime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Lime 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Lime has no effect on the direction of Martin Marietta i.e., Martin Marietta and United States go up and down completely randomly.

Pair Corralation between Martin Marietta and United States

Considering the 90-day investment horizon Martin Marietta is expected to generate 18.16 times less return on investment than United States. But when comparing it to its historical volatility, Martin Marietta Materials is 2.3 times less risky than United States. It trades about 0.06 of its potential returns per unit of risk. United States Lime is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest  10,691  in United States Lime on August 30, 2024 and sell it today you would earn a total of  5,054  from holding United States Lime or generate 47.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Martin Marietta Materials  vs.  United States Lime

Martin Marietta Materials

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 9 (%) 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 December 2024.

United States Lime

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United States Lime are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady essential indicators, United States displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Martin Marietta and United States

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

The idea behind Martin Marietta Materials and United States Lime 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .