Correlation Between Martin Marietta and UMWELTBANK

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

Diversification Opportunities for Martin Marietta and UMWELTBANK

0.78

Correlation Coefficient

Martin Marietta  UMWELTBANK

Poor diversification

The 3 months correlation between Martin and UMWELTBANK is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and UMWELTBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMWELTBANK 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 UMWELTBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMWELTBANK has no effect on the direction of Martin Marietta i.e., Martin Marietta and UMWELTBANK go up and down completely randomly.

Pair Corralation between Martin Marietta and UMWELTBANK

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 0.59 times more return on investment than UMWELTBANK. However, Martin Marietta Materials is 1.68 times less risky than UMWELTBANK. It trades about 0.07 of its potential returns per unit of risk. UMWELTBANK is currently generating about -0.05 per unit of risk. If you would invest  32,774  in Martin Marietta Materials on September 29, 2024 and sell it today you would earn a total of  18,266  from holding Martin Marietta Materials or generate 55.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Martin Marietta Materials  vs.  UMWELTBANK

Martin Marietta Materials

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Martin Marietta may actually be approaching a critical reversion point that can send shares even higher in January 2025.

UMWELTBANK

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UMWELTBANK are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward-looking signals, UMWELTBANK exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Martin Marietta and UMWELTBANK

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

The idea behind Martin Marietta Materials and UMWELTBANK 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.