Correlation Between Martin Marietta and Sanyo Chemical

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

Diversification Opportunities for Martin Marietta and Sanyo Chemical

-0.54

Correlation Coefficient

Martin Marietta  Sanyo Chemical

Excellent diversification

The 3 months correlation between Martin and Sanyo is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Sanyo Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanyo Chemical Industries 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 Sanyo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanyo Chemical Industries has no effect on the direction of Martin Marietta i.e., Martin Marietta and Sanyo Chemical go up and down completely randomly.

Pair Corralation between Martin Marietta and Sanyo Chemical

Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the Sanyo Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Martin Marietta Materials is 1.27 times less risky than Sanyo Chemical. The stock trades about -0.73 of its potential returns per unit of risk. The Sanyo Chemical Industries is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  2,500  in Sanyo Chemical Industries on October 10, 2024 and sell it today you would lose (100.00) from holding Sanyo Chemical Industries or give up 4.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Martin Marietta Materials  vs.  Sanyo Chemical Industries

Martin Marietta Materials

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 1 (%) 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.

Sanyo Chemical Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanyo Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sanyo Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Martin Marietta and Sanyo Chemical

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

The idea behind Martin Marietta Materials and Sanyo Chemical Industries 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.