Correlation Between Martin Marietta and Mitsubishi Materials

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

Diversification Opportunities for Martin Marietta and Mitsubishi Materials

-0.5

Correlation Coefficient

Martin Marietta  Mitsubishi Materials

Very good diversification

The 3 months correlation between Martin and Mitsubishi is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Mitsubishi Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Materials 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 Mitsubishi Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Materials has no effect on the direction of Martin Marietta i.e., Martin Marietta and Mitsubishi Materials go up and down completely randomly.

Pair Corralation between Martin Marietta and Mitsubishi Materials

Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the Mitsubishi Materials. In addition to that, Martin Marietta is 1.05 times more volatile than Mitsubishi Materials. It trades about -0.15 of its total potential returns per unit of risk. Mitsubishi Materials is currently generating about 0.1 per unit of volatility. If you would invest  1,480  in Mitsubishi Materials on December 24, 2024 and sell it today you would earn a total of  120.00  from holding Mitsubishi Materials or generate 8.11% return on investment over 90 days.

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

Martin Marietta Materials  vs.  Mitsubishi Materials

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.

Mitsubishi Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Materials are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward-looking indicators, Mitsubishi Materials may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Martin Marietta and Mitsubishi Materials

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

The idea behind Martin Marietta Materials and Mitsubishi Materials 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.