Correlation Between Martin Marietta and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Martin Marietta and Electronic Arts 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 Electronic Arts 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 Electronic Arts, you can compare the effects of market volatilities on Martin Marietta and Electronic Arts 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 Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and Electronic Arts.
Diversification Opportunities for Martin Marietta and Electronic Arts
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Martin and Electronic is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts 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 Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of Martin Marietta i.e., Martin Marietta and Electronic Arts go up and down completely randomly.
Pair Corralation between Martin Marietta and Electronic Arts
Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 1.66 times more return on investment than Electronic Arts. However, Martin Marietta is 1.66 times more volatile than Electronic Arts. It trades about -0.32 of its potential returns per unit of risk. Electronic Arts is currently generating about -0.71 per unit of risk. If you would invest 56,402 in Martin Marietta Materials on October 11, 2024 and sell it today you would lose (5,387) from holding Martin Marietta Materials or give up 9.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 85.0% |
| Values | Daily Returns |
Martin Marietta Materials vs. Electronic Arts
Performance |
| Timeline |
| Martin Marietta Materials |
| Electronic Arts |
Martin Marietta and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and Electronic Arts
The main advantage of trading using opposite Martin Marietta and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, Electronic Arts 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 Electronic Arts will offset losses from the drop in Electronic Arts' long position.| Martin Marietta vs. Planet Fitness Cl | Martin Marietta vs. Ashtead Technology Holdings | Martin Marietta vs. Made Tech Group | Martin Marietta vs. Smarttech247 Group PLC |
| Electronic Arts vs. Martin Marietta Materials | Electronic Arts vs. Science in Sport | Electronic Arts vs. Capital Drilling | Electronic Arts vs. JB Hunt Transport |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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