Correlation Between HeidelbergCement and Martin Marietta

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

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

Diversification Opportunities for HeidelbergCement and Martin Marietta

0.88

Correlation Coefficient

HeidelbergCement  Martin Marietta

Very poor diversification

The 3 months correlation between HeidelbergCement and Martin is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding HeidelbergCement AG 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 HeidelbergCement 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 HeidelbergCement AG 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 HeidelbergCement i.e., HeidelbergCement and Martin Marietta go up and down completely randomly.

Pair Corralation between HeidelbergCement and Martin Marietta

Assuming the 90 days horizon HeidelbergCement AG is expected to generate 0.73 times more return on investment than Martin Marietta. However, HeidelbergCement AG is 1.37 times less risky than Martin Marietta. It trades about 0.4 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about 0.14 per unit of risk. If you would invest  10,215  in HeidelbergCement AG on September 4, 2024 and sell it today you would earn a total of  1,790  from holding HeidelbergCement AG or generate 17.52% return on investment over 90 days.

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

HeidelbergCement AG  vs.  Martin Marietta Materials

HeidelbergCement

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HeidelbergCement AG are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HeidelbergCement reported solid returns over the last few months and may actually be approaching a breakup point.

Martin Marietta Materials

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Martin Marietta reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HeidelbergCement and Martin Marietta

The main advantage of trading using opposite HeidelbergCement and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HeidelbergCement 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 HeidelbergCement AG 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.