Correlation Between Martin Marietta and Paychex
Can any of the company-specific risk be diversified away by investing in both Martin Marietta and Paychex 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 Paychex 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 Paychex, you can compare the effects of market volatilities on Martin Marietta and Paychex 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 Paychex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and Paychex.
Diversification Opportunities for Martin Marietta and Paychex
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Martin and Paychex is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Paychex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paychex 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 Paychex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paychex has no effect on the direction of Martin Marietta i.e., Martin Marietta and Paychex go up and down completely randomly.
Pair Corralation between Martin Marietta and Paychex
Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the Paychex. In addition to that, Martin Marietta is 1.79 times more volatile than Paychex. It trades about -0.32 of its total potential returns per unit of risk. Paychex is currently generating about -0.19 per unit of volatility. If you would invest 14,058 in Paychex on October 9, 2024 and sell it today you would lose (518.00) from holding Paychex or give up 3.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 84.21% |
| Values | Daily Returns |
Martin Marietta Materials vs. Paychex
Performance |
| Timeline |
| Martin Marietta Materials |
| Paychex |
Martin Marietta and Paychex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and Paychex
The main advantage of trading using opposite Martin Marietta and Paychex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, Paychex 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 Paychex will offset losses from the drop in Paychex's long position.| Martin Marietta vs. Axfood AB | Martin Marietta vs. Coeur Mining | Martin Marietta vs. URU Metals | Martin Marietta vs. First Class Metals |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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