Correlation Between Worldwide Healthcare and Martin Marietta

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

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

Diversification Opportunities for Worldwide Healthcare and Martin Marietta

-0.65

Correlation Coefficient

Worldwide Healthcare  Martin Marietta

Excellent diversification

The 3 months correlation between Worldwide and Martin is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Worldwide Healthcare Trust 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 Worldwide Healthcare 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 Worldwide Healthcare Trust 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 Worldwide Healthcare i.e., Worldwide Healthcare and Martin Marietta go up and down completely randomly.

Pair Corralation between Worldwide Healthcare and Martin Marietta

Assuming the 90 days trading horizon Worldwide Healthcare Trust is expected to generate 0.93 times more return on investment than Martin Marietta. However, Worldwide Healthcare Trust is 1.07 times less risky than Martin Marietta. It trades about -0.2 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about -0.27 per unit of risk. If you would invest  34,526  in Worldwide Healthcare Trust on September 14, 2024 and sell it today you would lose (1,626) from holding Worldwide Healthcare Trust or give up 4.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Worldwide Healthcare Trust  vs.  Martin Marietta Materials

Worldwide Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worldwide Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 Worldwide Healthcare and Martin Marietta

The main advantage of trading using opposite Worldwide Healthcare and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Worldwide Healthcare 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 Worldwide Healthcare Trust 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.