Correlation Between Short Term and MARTIN

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

By analyzing existing cross correlation between Short Term Fund A and MARTIN MARIETTA MATLS, you can compare the effects of market volatilities on Short Term and MARTIN 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 Short Term with a short position of MARTIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Term and MARTIN.

Diversification Opportunities for Short Term and MARTIN

-0.61

Correlation Coefficient

Short Term  MARTIN

Excellent diversification

The 3 months correlation between Short and MARTIN is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Fund A and MARTIN MARIETTA MATLS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARTIN MARIETTA MATLS and Short Term 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 Short Term Fund A are associated (or correlated) with MARTIN. 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 MATLS has no effect on the direction of Short Term i.e., Short Term and MARTIN go up and down completely randomly.

Pair Corralation between Short Term and MARTIN

Assuming the 90 days horizon Short Term Fund A is expected to generate 0.27 times more return on investment than MARTIN. However, Short Term Fund A is 3.65 times less risky than MARTIN. It trades about 0.24 of its potential returns per unit of risk. MARTIN MARIETTA MATLS is currently generating about -0.01 per unit of risk. If you would invest  915.00  in Short Term Fund A on September 24, 2024 and sell it today you would earn a total of  53.00  from holding Short Term Fund A or generate 5.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	62.9%
Values	Daily Returns

Short Term Fund A  vs.  MARTIN MARIETTA MATLS

Short Term Fund

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Fund A are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Short Term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

MARTIN MARIETTA MATLS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MARTIN MARIETTA MATLS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MARTIN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Short Term and MARTIN

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

The idea behind Short Term Fund A and MARTIN MARIETTA MATLS 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.