Correlation Between NVIDIA and Martin Marietta

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

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

Diversification Opportunities for NVIDIA and Martin Marietta

0.62

Correlation Coefficient

NVIDIA  Martin Marietta

Poor diversification

The 3 months correlation between NVIDIA and Martin is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA 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 NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and Martin Marietta go up and down completely randomly.

Pair Corralation between NVIDIA and Martin Marietta

Given the investment horizon of 90 days NVIDIA is expected to generate 1.2 times more return on investment than Martin Marietta. However, NVIDIA is 1.2 times more volatile than Martin Marietta Materials. It trades about 0.07 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about 0.05 per unit of risk. If you would invest  12,771  in NVIDIA on October 5, 2024 and sell it today you would earn a total of  1,060  from holding NVIDIA or generate 8.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

NVIDIA  vs.  Martin Marietta Materials

NVIDIA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Martin Marietta Materials

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Martin Marietta Materials has generated negative risk-adjusted returns adding no value to investors with long positions. 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 NVIDIA and Martin Marietta

The main advantage of trading using opposite NVIDIA and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA 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 NVIDIA 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.