Correlation Between Reliance Industries and Martin Marietta

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

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

Diversification Opportunities for Reliance Industries and Martin Marietta

-0.8

Correlation Coefficient

Reliance Industries  Martin Marietta

Pay attention - limited upside

The 3 months correlation between Reliance and Martin is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Ltd 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 Reliance Industries 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 Reliance Industries Ltd 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 Reliance Industries i.e., Reliance Industries and Martin Marietta go up and down completely randomly.

Pair Corralation between Reliance Industries and Martin Marietta

Assuming the 90 days trading horizon Reliance Industries Ltd is expected to under-perform the Martin Marietta. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Industries Ltd is 1.25 times less risky than Martin Marietta. The stock trades about -0.2 of its potential returns per unit of risk. The Martin Marietta Materials is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  52,758  in Martin Marietta Materials on September 14, 2024 and sell it today you would earn a total of  3,610  from holding Martin Marietta Materials or generate 6.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Reliance Industries Ltd  vs.  Martin Marietta Materials

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Martin Marietta Materials

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 5 (%) 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 Reliance Industries and Martin Marietta

The main advantage of trading using opposite Reliance Industries and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industries 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 Reliance Industries Ltd 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.