Correlation Between STEEL DYNAMICS and Martin Marietta

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

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

Diversification Opportunities for STEEL DYNAMICS and Martin Marietta

0.12

Correlation Coefficient

STEEL DYNAMICS  Martin Marietta

Average diversification

The 3 months correlation between STEEL and Martin is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding STEEL DYNAMICS 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 STEEL DYNAMICS 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 STEEL DYNAMICS 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 STEEL DYNAMICS i.e., STEEL DYNAMICS and Martin Marietta go up and down completely randomly.

Pair Corralation between STEEL DYNAMICS and Martin Marietta

Assuming the 90 days trading horizon STEEL DYNAMICS is expected to generate 1.47 times more return on investment than Martin Marietta. However, STEEL DYNAMICS is 1.47 times more volatile than Martin Marietta Materials. It trades about 0.04 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about -0.14 per unit of risk. If you would invest  11,055  in STEEL DYNAMICS on December 21, 2024 and sell it today you would earn a total of  487.00  from holding STEEL DYNAMICS or generate 4.41% return on investment over 90 days.

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

STEEL DYNAMICS  vs.  Martin Marietta Materials

STEEL DYNAMICS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in STEEL DYNAMICS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, STEEL DYNAMICS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Martin Marietta Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Martin Marietta Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with STEEL DYNAMICS and Martin Marietta

The main advantage of trading using opposite STEEL DYNAMICS and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEEL DYNAMICS 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 STEEL DYNAMICS 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 Transaction History module to view history of all your transactions and understand their impact on performance.