Correlation Between Martin Marietta and EHEALTH

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

Diversification Opportunities for Martin Marietta and EHEALTH

0.77

Correlation Coefficient

Martin Marietta  EHEALTH

Poor diversification

The 3 months correlation between Martin and EHEALTH is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and EHEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EHEALTH 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 EHEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EHEALTH has no effect on the direction of Martin Marietta i.e., Martin Marietta and EHEALTH go up and down completely randomly.

Pair Corralation between Martin Marietta and EHEALTH

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 0.38 times more return on investment than EHEALTH. However, Martin Marietta Materials is 2.64 times less risky than EHEALTH. It trades about -0.12 of its potential returns per unit of risk. EHEALTH is currently generating about -0.08 per unit of risk. If you would invest  50,460  in Martin Marietta Materials on December 30, 2024 and sell it today you would lose (5,680) from holding Martin Marietta Materials or give up 11.26% 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.  EHEALTH

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.

EHEALTH

Risk-Adjusted Performance

Very Weak

Over the last 90 days EHEALTH 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 rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Martin Marietta and EHEALTH

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

The idea behind Martin Marietta Materials and EHEALTH 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.