Correlation Between Martin Marietta and Citigroup

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

Diversification Opportunities for Martin Marietta and Citigroup

0.44

Correlation Coefficient

Martin Marietta  Citigroup

Very weak diversification

The 3 months correlation between Martin and Citigroup is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup 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 Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Martin Marietta i.e., Martin Marietta and Citigroup go up and down completely randomly.

Pair Corralation between Martin Marietta and Citigroup

Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the Citigroup. But the stock apears to be less risky and, when comparing its historical volatility, Martin Marietta Materials is 1.5 times less risky than Citigroup. The stock trades about -0.7 of its potential returns per unit of risk. The Citigroup is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,836  in Citigroup on October 10, 2024 and sell it today you would earn a total of  255.00  from holding Citigroup or generate 3.73% return on investment over 90 days.

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

Martin Marietta Materials  vs.  Citigroup

Martin Marietta Materials

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 2 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Citigroup

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Martin Marietta and Citigroup

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

The idea behind Martin Marietta Materials and Citigroup 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.