Correlation Between Martin Marietta and Amazon

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

Diversification Opportunities for Martin Marietta and Amazon

0.86

Correlation Coefficient

Martin Marietta  Amazon

Very poor diversification

The 3 months correlation between Martin and Amazon is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Martin Marietta i.e., Martin Marietta and Amazon go up and down completely randomly.

Pair Corralation between Martin Marietta and Amazon

Assuming the 90 days trading horizon Martin Marietta is expected to generate 42.81 times less return on investment than Amazon. But when comparing it to its historical volatility, Martin Marietta Materials is 2.02 times less risky than Amazon. It trades about 0.01 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  388,426  in Amazon Inc on August 31, 2024 and sell it today you would earn a total of  34,803  from holding Amazon Inc or generate 8.96% return on investment over 90 days.

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

Martin Marietta Materials  vs.  Amazon Inc

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 fairly weak primary indicators, Martin Marietta showed solid returns over the last few months and may actually be approaching a breakup point.

Amazon Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Amazon showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Martin Marietta and Amazon

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

The idea behind Martin Marietta Materials and Amazon Inc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.