Correlation Between Martin Marietta and Veolia Environnement

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

Diversification Opportunities for Martin Marietta and Veolia Environnement

-0.59

Correlation Coefficient

Martin Marietta  Veolia Environnement

Excellent diversification

The 3 months correlation between Martin and Veolia is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Veolia Environnement VE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement 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 Veolia Environnement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veolia Environnement has no effect on the direction of Martin Marietta i.e., Martin Marietta and Veolia Environnement go up and down completely randomly.

Pair Corralation between Martin Marietta and Veolia Environnement

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 1.42 times more return on investment than Veolia Environnement. However, Martin Marietta is 1.42 times more volatile than Veolia Environnement VE. It trades about 0.15 of its potential returns per unit of risk. Veolia Environnement VE is currently generating about -0.12 per unit of risk. If you would invest  50,719  in Martin Marietta Materials on September 5, 2024 and sell it today you would earn a total of  7,953  from holding Martin Marietta Materials or generate 15.68% return on investment over 90 days.

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

Martin Marietta Materials  vs.  Veolia Environnement VE

Martin Marietta Materials

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 11 (%) 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.

Veolia Environnement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veolia Environnement VE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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 Veolia Environnement

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

The idea behind Martin Marietta Materials and Veolia Environnement VE 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.