Correlation Between Nippon Light and Martin Marietta

Can any of the company-specific risk be diversified away by investing in both Nippon Light and Martin Marietta 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 Nippon Light and Martin Marietta into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nippon Light Metal and Martin Marietta Materials, you can compare the effects of market volatilities on Nippon Light and Martin Marietta 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 Nippon Light with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Light and Martin Marietta.

Diversification Opportunities for Nippon Light and Martin Marietta

-0.57

Correlation Coefficient

Nippon Light  Martin Marietta

Excellent diversification

The 3 months correlation between Nippon and Martin is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Light Metal and Martin Marietta Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Marietta Materials and Nippon Light 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 Nippon Light Metal are associated (or correlated) with Martin Marietta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Marietta Materials has no effect on the direction of Nippon Light i.e., Nippon Light and Martin Marietta go up and down completely randomly.

Pair Corralation between Nippon Light and Martin Marietta

Assuming the 90 days horizon Nippon Light Metal is expected to generate 1.15 times more return on investment than Martin Marietta. However, Nippon Light is 1.15 times more volatile than Martin Marietta Materials. It trades about 0.11 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about -0.33 per unit of risk. If you would invest  910.00  in Nippon Light Metal on October 9, 2024 and sell it today you would earn a total of  40.00  from holding Nippon Light Metal or generate 4.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.37%
Values	Daily Returns

Nippon Light Metal  vs.  Martin Marietta Materials

Nippon Light Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Martin Marietta Materials

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Martin Marietta may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nippon Light and Martin Marietta

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

The idea behind Nippon Light Metal and Martin Marietta 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.