Correlation Between PLAYMATES TOYS and Martin Marietta

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Can any of the company-specific risk be diversified away by investing in both PLAYMATES TOYS 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 PLAYMATES TOYS and Martin Marietta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PLAYMATES TOYS and Martin Marietta Materials, you can compare the effects of market volatilities on PLAYMATES TOYS 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 PLAYMATES TOYS with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLAYMATES TOYS and Martin Marietta.

Diversification Opportunities for PLAYMATES TOYS and Martin Marietta

PLAYMATESMartinDiversified AwayPLAYMATESMartinDiversified Away100%
0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between PLAYMATES and Martin is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding PLAYMATES TOYS 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 PLAYMATES TOYS 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 PLAYMATES TOYS 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 PLAYMATES TOYS i.e., PLAYMATES TOYS and Martin Marietta go up and down completely randomly.

Pair Corralation between PLAYMATES TOYS and Martin Marietta

Assuming the 90 days trading horizon PLAYMATES TOYS is expected to generate 3.77 times more return on investment than Martin Marietta. However, PLAYMATES TOYS is 3.77 times more volatile than Martin Marietta Materials. It trades about 0.08 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about 0.06 per unit of risk. If you would invest  1.45  in PLAYMATES TOYS on November 19, 2024 and sell it today you would earn a total of  5.05  from holding PLAYMATES TOYS or generate 348.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

PLAYMATES TOYS  vs.  Martin Marietta Materials

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-505
JavaScript chart by amCharts 3.21.1545P MMX
       Timeline  
PLAYMATES TOYS 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days PLAYMATES TOYS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PLAYMATES TOYS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.0620.0640.0660.0680.070.0720.074
Martin Marietta Materials 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Martin Marietta Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb500510520530540550560570

PLAYMATES TOYS and Martin Marietta Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.62-4.96-3.3-1.630.01.633.294.956.61 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.1545P MMX
       Returns  

Pair Trading with PLAYMATES TOYS and Martin Marietta

The main advantage of trading using opposite PLAYMATES TOYS and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PLAYMATES TOYS 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 PLAYMATES TOYS 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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