Correlation Between Promotora and Martin Marietta

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

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

Diversification Opportunities for Promotora and Martin Marietta

0.27

Correlation Coefficient

Promotora  Martin Marietta

Modest diversification

The 3 months correlation between Promotora and Martin is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Promotora y Operadora 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 Promotora 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 Promotora y Operadora 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 Promotora i.e., Promotora and Martin Marietta go up and down completely randomly.

Pair Corralation between Promotora and Martin Marietta

Assuming the 90 days trading horizon Promotora is expected to generate 1.21 times less return on investment than Martin Marietta. But when comparing it to its historical volatility, Promotora y Operadora is 1.27 times less risky than Martin Marietta. It trades about 0.06 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,034,960  in Martin Marietta Materials on October 20, 2024 and sell it today you would earn a total of  62,589  from holding Martin Marietta Materials or generate 6.05% return on investment over 90 days.

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

Promotora y Operadora  vs.  Martin Marietta Materials

Promotora y Operadora

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Promotora y Operadora are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Promotora 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

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. In spite of fairly weak primary indicators, Martin Marietta may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Promotora and Martin Marietta

The main advantage of trading using opposite Promotora and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Promotora 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 Promotora y Operadora 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.