Correlation Between Summit Materials and Martin Marietta
Can any of the company-specific risk be diversified away by investing in both Summit Materials 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 Summit Materials and Martin Marietta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials Cl and Martin Marietta Materials, you can compare the effects of market volatilities on Summit Materials 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 Summit Materials with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Martin Marietta.
Diversification Opportunities for Summit Materials and Martin Marietta
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Summit and Martin is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials Cl 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 Summit Materials 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 Summit Materials Cl 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 Summit Materials i.e., Summit Materials and Martin Marietta go up and down completely randomly.
Pair Corralation between Summit Materials and Martin Marietta
Assuming the 90 days trading horizon Summit Materials Cl is expected to generate 1.16 times more return on investment than Martin Marietta. However, Summit Materials is 1.16 times more volatile than Martin Marietta Materials. It trades about 0.22 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about 0.05 per unit of risk. If you would invest 4,539 in Summit Materials Cl on August 30, 2024 and sell it today you would earn a total of 553.00 from holding Summit Materials Cl or generate 12.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials Cl vs. Martin Marietta Materials
Performance |
| Timeline |
| Summit Materials |
| Martin Marietta Materials |
Summit Materials and Martin Marietta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Martin Marietta
The main advantage of trading using opposite Summit Materials and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials 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.| Summit Materials vs. Tungsten West PLC | Summit Materials vs. Argo Group Limited | Summit Materials vs. Hardide PLC | Summit Materials vs. Versarien PLC |
| Martin Marietta vs. Tungsten West PLC | Martin Marietta vs. Argo Group Limited | Martin Marietta vs. Hardide PLC | Martin Marietta vs. Versarien PLC |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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