Correlation Between Medtronic PLC and Martin Marietta
Can any of the company-specific risk be diversified away by investing in both Medtronic PLC 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 Medtronic PLC and Martin Marietta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medtronic PLC and Martin Marietta Materials, you can compare the effects of market volatilities on Medtronic PLC 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 Medtronic PLC with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medtronic PLC and Martin Marietta.
Diversification Opportunities for Medtronic PLC and Martin Marietta
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Medtronic and Martin is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Medtronic PLC 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 Medtronic PLC 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 Medtronic PLC 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 Medtronic PLC i.e., Medtronic PLC and Martin Marietta go up and down completely randomly.
Pair Corralation between Medtronic PLC and Martin Marietta
Assuming the 90 days trading horizon Medtronic PLC is expected to under-perform the Martin Marietta. But the stock apears to be less risky and, when comparing its historical volatility, Medtronic PLC is 1.14 times less risky than Martin Marietta. The stock trades about -0.01 of its potential returns per unit of risk. The Martin Marietta Materials is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 54,700 in Martin Marietta Materials on September 1, 2024 and sell it today you would earn a total of 1,500 from holding Martin Marietta Materials or generate 2.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Medtronic PLC vs. Martin Marietta Materials
Performance |
| Timeline |
| Medtronic PLC |
| Martin Marietta Materials |
Medtronic PLC and Martin Marietta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medtronic PLC and Martin Marietta
The main advantage of trading using opposite Medtronic PLC and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medtronic PLC 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.| Medtronic PLC vs. Martin Marietta Materials | Medtronic PLC vs. Fukuyama Transporting Co | Medtronic PLC vs. Applied Materials | Medtronic PLC vs. Ming Le Sports |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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