Correlation Between Martin Marietta and MGP Ingredients

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

Diversification Opportunities for Martin Marietta and MGP Ingredients

-0.8

Correlation Coefficient

Martin Marietta  MGP Ingredients

Pay attention - limited upside

The 3 months correlation between Martin and MGP is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients 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 MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of Martin Marietta i.e., Martin Marietta and MGP Ingredients go up and down completely randomly.

Pair Corralation between Martin Marietta and MGP Ingredients

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 0.4 times more return on investment than MGP Ingredients. However, Martin Marietta Materials is 2.49 times less risky than MGP Ingredients. It trades about -0.03 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.17 per unit of risk. If you would invest  51,847  in Martin Marietta Materials on September 22, 2024 and sell it today you would lose (1,247) from holding Martin Marietta Materials or give up 2.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Martin Marietta Materials  vs.  MGP Ingredients

Martin Marietta Materials

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 3 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

MGP Ingredients

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGP Ingredients has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Martin Marietta and MGP Ingredients

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

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