Correlation Between Martin Marietta and L3Harris Technologies

Can any of the company-specific risk be diversified away by investing in both Martin Marietta and L3Harris Technologies 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 L3Harris Technologies 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 L3Harris Technologies, you can compare the effects of market volatilities on Martin Marietta and L3Harris Technologies 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 L3Harris Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and L3Harris Technologies.

Diversification Opportunities for Martin Marietta and L3Harris Technologies

0.58

Correlation Coefficient

Martin Marietta  L3Harris Technologies

Very weak diversification

The 3 months correlation between Martin and L3Harris is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies 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 L3Harris Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L3Harris Technologies has no effect on the direction of Martin Marietta i.e., Martin Marietta and L3Harris Technologies go up and down completely randomly.

Pair Corralation between Martin Marietta and L3Harris Technologies

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 1.21 times more return on investment than L3Harris Technologies. However, Martin Marietta is 1.21 times more volatile than L3Harris Technologies. It trades about 0.02 of its potential returns per unit of risk. L3Harris Technologies is currently generating about -0.09 per unit of risk. If you would invest  53,381  in Martin Marietta Materials on September 24, 2024 and sell it today you would earn a total of  393.00  from holding Martin Marietta Materials or generate 0.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Martin Marietta Materials  vs.  L3Harris Technologies

Martin Marietta Materials

Risk-Adjusted Performance

1 of 100

Weak

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

L3Harris Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days L3Harris Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic 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 Marietta and L3Harris Technologies

The main advantage of trading using opposite Martin Marietta and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, L3Harris Technologies 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 L3Harris Technologies will offset losses from the drop in L3Harris Technologies' long position.

The idea behind Martin Marietta Materials and L3Harris Technologies 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.