Correlation Between Martin Marietta and Fortune Brands

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

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

Diversification Opportunities for Martin Marietta and Fortune Brands

-0.08

Correlation Coefficient

Martin Marietta  Fortune Brands

Good diversification

The 3 months correlation between Martin and Fortune is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Fortune Brands Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Home and Martin Marietta 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 Materials are associated (or correlated) with Fortune Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Brands Home has no effect on the direction of Martin Marietta i.e., Martin Marietta and Fortune Brands go up and down completely randomly.

Pair Corralation between Martin Marietta and Fortune Brands

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 0.9 times more return on investment than Fortune Brands. However, Martin Marietta Materials is 1.12 times less risky than Fortune Brands. It trades about 0.14 of its potential returns per unit of risk. Fortune Brands Home is currently generating about 0.01 per unit of risk. If you would invest  52,439  in Martin Marietta Materials on September 2, 2024 and sell it today you would earn a total of  7,561  from holding Martin Marietta Materials or generate 14.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.94%
Values	Daily Returns

Martin Marietta Materials  vs.  Fortune Brands Home

Martin Marietta Materials

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Martin Marietta unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fortune Brands Home

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fortune Brands Home are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fortune Brands is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Martin Marietta and Fortune Brands

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

The idea behind Martin Marietta Materials and Fortune Brands Home 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.