Correlation Between Petrleo Brasileiro and Martin Marietta

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

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

Diversification Opportunities for Petrleo Brasileiro and Martin Marietta

0.0

Correlation Coefficient

Petrleo Brasileiro  Martin Marietta

Pay attention - limited upside

The 3 months correlation between Petrleo and Martin is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA 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 Petrleo Brasileiro 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 Petrleo Brasileiro SA 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 Petrleo Brasileiro i.e., Petrleo Brasileiro and Martin Marietta go up and down completely randomly.

Pair Corralation between Petrleo Brasileiro and Martin Marietta

Assuming the 90 days trading horizon Petrleo Brasileiro is expected to generate 1.2 times less return on investment than Martin Marietta. In addition to that, Petrleo Brasileiro is 1.38 times more volatile than Martin Marietta Materials. It trades about 0.05 of its total potential returns per unit of risk. Martin Marietta Materials is currently generating about 0.08 per unit of volatility. If you would invest  652,224  in Martin Marietta Materials on September 19, 2024 and sell it today you would earn a total of  462,633  from holding Martin Marietta Materials or generate 70.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Petrleo Brasileiro SA  vs.  Martin Marietta Materials

Petrleo Brasileiro

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Petrleo Brasileiro SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Petrleo Brasileiro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 fairly unfluctuating primary indicators, Martin Marietta may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petrleo Brasileiro and Martin Marietta

The main advantage of trading using opposite Petrleo Brasileiro and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrleo Brasileiro 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 Petrleo Brasileiro SA 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.