Correlation Between Martin Marietta and Mitsubishi Materials

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

Diversification Opportunities for Martin Marietta and Mitsubishi Materials

-0.72

Correlation Coefficient

Martin Marietta  Mitsubishi Materials

Pay attention - limited upside

The 3 months correlation between Martin and Mitsubishi is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Mitsubishi Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Materials 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 Mitsubishi Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Materials has no effect on the direction of Martin Marietta i.e., Martin Marietta and Mitsubishi Materials go up and down completely randomly.

Pair Corralation between Martin Marietta and Mitsubishi Materials

Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 1.08 times more return on investment than Mitsubishi Materials. However, Martin Marietta is 1.08 times more volatile than Mitsubishi Materials. It trades about 0.12 of its potential returns per unit of risk. Mitsubishi Materials is currently generating about -0.01 per unit of risk. If you would invest  47,403  in Martin Marietta Materials on September 15, 2024 and sell it today you would earn a total of  5,077  from holding Martin Marietta Materials or generate 10.71% return on investment over 90 days.

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

Martin Marietta Materials  vs.  Mitsubishi Materials

Martin Marietta Materials

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Martin Marietta may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mitsubishi Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, Mitsubishi Materials is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Martin Marietta and Mitsubishi Materials

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

The idea behind Martin Marietta Materials and Mitsubishi 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.