Correlation Between MARTIN and NL Industries

Can any of the company-specific risk be diversified away by investing in both MARTIN and NL Industries 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 NL Industries 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 NL Industries, you can compare the effects of market volatilities on MARTIN and NL Industries 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 NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of MARTIN and NL Industries.

Diversification Opportunities for MARTIN and NL Industries

0.19

Correlation Coefficient

MARTIN  NL Industries

Average diversification

The 3 months correlation between MARTIN and NL Industries is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding MARTIN MARIETTA MATLS and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries 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 NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of MARTIN i.e., MARTIN and NL Industries go up and down completely randomly.

Pair Corralation between MARTIN and NL Industries

Assuming the 90 days trading horizon MARTIN MARIETTA MATLS is expected to generate 0.3 times more return on investment than NL Industries. However, MARTIN MARIETTA MATLS is 3.33 times less risky than NL Industries. It trades about -0.23 of its potential returns per unit of risk. NL Industries is currently generating about -0.18 per unit of risk. If you would invest  9,694  in MARTIN MARIETTA MATLS on October 12, 2024 and sell it today you would lose (376.00) from holding MARTIN MARIETTA MATLS or give up 3.88% of portfolio value over 90 days.

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

MARTIN MARIETTA MATLS  vs.  NL Industries

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

NL Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, NL Industries is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with MARTIN and NL Industries

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

The idea behind MARTIN MARIETTA MATLS and NL Industries 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.