Correlation Between Martin Marietta and CEMATRIX

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

Diversification Opportunities for Martin Marietta and CEMATRIX

-0.54

Correlation Coefficient

Martin Marietta  CEMATRIX

Excellent diversification

The 3 months correlation between Martin and CEMATRIX is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and CEMATRIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEMATRIX 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 CEMATRIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEMATRIX has no effect on the direction of Martin Marietta i.e., Martin Marietta and CEMATRIX go up and down completely randomly.

Pair Corralation between Martin Marietta and CEMATRIX

Considering the 90-day investment horizon Martin Marietta is expected to generate 2.28 times less return on investment than CEMATRIX. But when comparing it to its historical volatility, Martin Marietta Materials is 3.55 times less risky than CEMATRIX. It trades about 0.04 of its potential returns per unit of risk. CEMATRIX is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  20.00  in CEMATRIX on September 1, 2024 and sell it today you would earn a total of  0.00  from holding CEMATRIX or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Martin Marietta Materials  vs.  CEMATRIX

Martin Marietta Materials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent essential indicators, Martin Marietta displayed solid returns over the last few months and may actually be approaching a breakup point.

CEMATRIX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CEMATRIX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CEMATRIX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Martin Marietta and CEMATRIX

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

The idea behind Martin Marietta Materials and CEMATRIX 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.