Correlation Between Apple and Martin Marietta

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

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

Diversification Opportunities for Apple and Martin Marietta

0.78

Correlation Coefficient

Apple  Martin Marietta

Poor diversification

The 3 months correlation between Apple and Martin is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Martin Marietta Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Marietta Materials and Apple 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 Apple Inc are associated (or correlated) with Martin Marietta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Marietta Materials has no effect on the direction of Apple i.e., Apple and Martin Marietta go up and down completely randomly.

Pair Corralation between Apple and Martin Marietta

Assuming the 90 days trading horizon Apple is expected to generate 2.09 times less return on investment than Martin Marietta. But when comparing it to its historical volatility, Apple Inc is 1.06 times less risky than Martin Marietta. It trades about 0.09 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  48,111  in Martin Marietta Materials on August 31, 2024 and sell it today you would earn a total of  8,329  from holding Martin Marietta Materials or generate 17.31% return on investment over 90 days.

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

Apple Inc  vs.  Martin Marietta Materials

Apple Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Martin Marietta Materials

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 14 (%) 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.

Pair Trading with Apple and Martin Marietta

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

The idea behind Apple Inc and Martin Marietta Materials 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.