Correlation Between Martin Marietta and Porvair Plc

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

Diversification Opportunities for Martin Marietta and Porvair Plc

-0.43

Correlation Coefficient

Martin Marietta  Porvair Plc

Very good diversification

The 3 months correlation between Martin and Porvair is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Porvair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porvair plc 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 Porvair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porvair plc has no effect on the direction of Martin Marietta i.e., Martin Marietta and Porvair Plc go up and down completely randomly.

Pair Corralation between Martin Marietta and Porvair Plc

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 0.77 times more return on investment than Porvair Plc. However, Martin Marietta Materials is 1.3 times less risky than Porvair Plc. It trades about 0.07 of its potential returns per unit of risk. Porvair plc is currently generating about 0.02 per unit of risk. If you would invest  33,647  in Martin Marietta Materials on September 25, 2024 and sell it today you would earn a total of  20,127  from holding Martin Marietta Materials or generate 59.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.2%
Values	Daily Returns

Martin Marietta Materials  vs.  Porvair plc

Martin Marietta Materials

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Martin Marietta Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Martin Marietta is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Porvair plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Porvair plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Porvair Plc is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Martin Marietta and Porvair Plc

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

The idea behind Martin Marietta Materials and Porvair plc 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.