Correlation Between MARTIN and Acme United

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

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

Diversification Opportunities for MARTIN and Acme United

0.25

Correlation Coefficient

MARTIN  Acme United

Modest diversification

The 3 months correlation between MARTIN and Acme is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding MARTIN MARIETTA MATLS and Acme United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acme United and MARTIN 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 MARTIN MARIETTA MATLS are associated (or correlated) with Acme United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acme United has no effect on the direction of MARTIN i.e., MARTIN and Acme United go up and down completely randomly.

Pair Corralation between MARTIN and Acme United

Assuming the 90 days trading horizon MARTIN is expected to generate 30.36 times less return on investment than Acme United. But when comparing it to its historical volatility, MARTIN MARIETTA MATLS is 6.4 times less risky than Acme United. It trades about 0.01 of its potential returns per unit of risk. Acme United is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,178  in Acme United on September 28, 2024 and sell it today you would earn a total of  1,504  from holding Acme United or generate 69.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	62.7%
Values	Daily Returns

MARTIN MARIETTA MATLS  vs.  Acme United

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Acme United

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acme United has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with MARTIN and Acme United

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

The idea behind MARTIN MARIETTA MATLS and Acme United 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.