Correlation Between Martin Marietta and Associated British

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

Diversification Opportunities for Martin Marietta and Associated British

0.28

Correlation Coefficient

Martin Marietta  Associated British

Modest diversification

The 3 months correlation between Martin and Associated is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods 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 Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Martin Marietta i.e., Martin Marietta and Associated British go up and down completely randomly.

Pair Corralation between Martin Marietta and Associated British

Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the Associated British. But the stock apears to be less risky and, when comparing its historical volatility, Martin Marietta Materials is 1.09 times less risky than Associated British. The stock trades about -0.12 of its potential returns per unit of risk. The Associated British Foods is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,468  in Associated British Foods on December 30, 2024 and sell it today you would lose (135.00) from holding Associated British Foods or give up 5.47% of portfolio value over 90 days.

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

Martin Marietta Materials  vs.  Associated British Foods

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 fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Associated British Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Associated British is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Martin Marietta and Associated British

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

The idea behind Martin Marietta Materials and Associated British Foods 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.