Correlation Between Martin Marietta and Liaoning Port

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

Diversification Opportunities for Martin Marietta and Liaoning Port

0.7

Correlation Coefficient

Martin Marietta  Liaoning Port

Poor diversification

The 3 months correlation between Martin and Liaoning is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Liaoning Port CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liaoning Port CoLtd 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 Liaoning Port. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liaoning Port CoLtd has no effect on the direction of Martin Marietta i.e., Martin Marietta and Liaoning Port go up and down completely randomly.

Pair Corralation between Martin Marietta and Liaoning Port

Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the Liaoning Port. In addition to that, Martin Marietta is 1.04 times more volatile than Liaoning Port CoLtd. It trades about -0.15 of its total potential returns per unit of risk. Liaoning Port CoLtd is currently generating about -0.06 per unit of volatility. If you would invest  7.90  in Liaoning Port CoLtd on December 23, 2024 and sell it today you would lose (0.45) from holding Liaoning Port CoLtd or give up 5.7% 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.  Liaoning Port CoLtd

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 fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Liaoning Port CoLtd

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Martin Marietta and Liaoning Port

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

The idea behind Martin Marietta Materials and Liaoning Port CoLtd 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.