Correlation Between Martin Marietta and DONGJIANG ENVIRONMENTAL

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

Diversification Opportunities for Martin Marietta and DONGJIANG ENVIRONMENTAL

0.71

Correlation Coefficient

Martin Marietta  DONGJIANG ENVIRONMENTAL

Poor diversification

The 3 months correlation between Martin and DONGJIANG is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and DONGJIANG ENVIRONMENTAL H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DONGJIANG ENVIRONMENTAL 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 DONGJIANG ENVIRONMENTAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DONGJIANG ENVIRONMENTAL has no effect on the direction of Martin Marietta i.e., Martin Marietta and DONGJIANG ENVIRONMENTAL go up and down completely randomly.

Pair Corralation between Martin Marietta and DONGJIANG ENVIRONMENTAL

Assuming the 90 days horizon Martin Marietta Materials is expected to generate 0.19 times more return on investment than DONGJIANG ENVIRONMENTAL. However, Martin Marietta Materials is 5.17 times less risky than DONGJIANG ENVIRONMENTAL. It trades about -1.08 of its potential returns per unit of risk. DONGJIANG ENVIRONMENTAL H is currently generating about -0.47 per unit of risk. If you would invest  54,980  in Martin Marietta Materials on October 10, 2024 and sell it today you would lose (5,260) from holding Martin Marietta Materials or give up 9.57% 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.  DONGJIANG ENVIRONMENTAL H

Martin Marietta Materials

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Martin Marietta is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

DONGJIANG ENVIRONMENTAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DONGJIANG ENVIRONMENTAL H has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Martin Marietta and DONGJIANG ENVIRONMENTAL

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

The idea behind Martin Marietta Materials and DONGJIANG ENVIRONMENTAL H 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.