Correlation Between Martin Marietta and Yokohama Rubber

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

Diversification Opportunities for Martin Marietta and Yokohama Rubber

-0.67

Correlation Coefficient

Martin Marietta  Yokohama Rubber

Excellent diversification

The 3 months correlation between Martin and Yokohama is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and The Yokohama Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokohama Rubber 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 Yokohama Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokohama Rubber has no effect on the direction of Martin Marietta i.e., Martin Marietta and Yokohama Rubber go up and down completely randomly.

Pair Corralation between Martin Marietta and Yokohama Rubber

Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the Yokohama Rubber. But the stock apears to be less risky and, when comparing its historical volatility, Martin Marietta Materials is 1.58 times less risky than Yokohama Rubber. The stock trades about -0.74 of its potential returns per unit of risk. The The Yokohama Rubber is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,870  in The Yokohama Rubber on September 24, 2024 and sell it today you would earn a total of  130.00  from holding The Yokohama Rubber or generate 6.95% return on investment over 90 days.

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

Martin Marietta Materials  vs.  The Yokohama Rubber

Martin Marietta Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 6 (%) 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.

Yokohama Rubber

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days The Yokohama Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Yokohama Rubber is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Martin Marietta and Yokohama Rubber

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

The idea behind Martin Marietta Materials and The Yokohama Rubber 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.