Correlation Between National Bank and Martin Marietta

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

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

Diversification Opportunities for National Bank and Martin Marietta

0.92

Correlation Coefficient

National Bank  Martin Marietta

Almost no diversification

The 3 months correlation between National and Martin is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings 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 National Bank 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 National Bank Holdings 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 National Bank i.e., National Bank and Martin Marietta go up and down completely randomly.

Pair Corralation between National Bank and Martin Marietta

Assuming the 90 days horizon National Bank Holdings is expected to generate 1.63 times more return on investment than Martin Marietta. However, National Bank is 1.63 times more volatile than Martin Marietta Materials. It trades about -0.43 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about -0.74 per unit of risk. If you would invest  4,531  in National Bank Holdings on September 24, 2024 and sell it today you would lose (511.00) from holding National Bank Holdings or give up 11.28% of portfolio value over 90 days.

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

National Bank Holdings  vs.  Martin Marietta Materials

National Bank Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Martin Marietta Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 6 (%) 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.

Pair Trading with National Bank and Martin Marietta

The main advantage of trading using opposite National Bank and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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 National Bank Holdings 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.

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.