Correlation Between Martin Marietta and Adidas AG

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

Diversification Opportunities for Martin Marietta and Adidas AG

-0.62

Correlation Coefficient

Martin Marietta  Adidas AG

Excellent diversification

The 3 months correlation between Martin and Adidas is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG 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 Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of Martin Marietta i.e., Martin Marietta and Adidas AG go up and down completely randomly.

Pair Corralation between Martin Marietta and Adidas AG

Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the Adidas AG. But the stock apears to be less risky and, when comparing its historical volatility, Martin Marietta Materials is 1.05 times less risky than Adidas AG. The stock trades about -0.01 of its potential returns per unit of risk. The adidas AG is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  20,178  in adidas AG on October 25, 2024 and sell it today you would earn a total of  4,912  from holding adidas AG or generate 24.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.52%
Values	Daily Returns

Martin Marietta Materials  vs.  adidas AG

Martin Marietta Materials

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Martin Marietta is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

adidas AG

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in adidas AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Adidas AG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Martin Marietta and Adidas AG

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

The idea behind Martin Marietta Materials and adidas AG 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.