Correlation Between Centrica PLC and Martin Marietta
Can any of the company-specific risk be diversified away by investing in both Centrica 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 Centrica 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 Centrica PLC and Martin Marietta Materials, you can compare the effects of market volatilities on Centrica 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 Centrica PLC with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrica PLC and Martin Marietta.
Diversification Opportunities for Centrica PLC and Martin Marietta
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Centrica and Martin is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Centrica 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 Centrica 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 Centrica 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 Centrica PLC i.e., Centrica PLC and Martin Marietta go up and down completely randomly.
Pair Corralation between Centrica PLC and Martin Marietta
Assuming the 90 days trading horizon Centrica PLC is expected to generate 34.25 times more return on investment than Martin Marietta. However, Centrica PLC is 34.25 times more volatile than Martin Marietta Materials. It trades about 0.05 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about 0.07 per unit of risk. If you would invest 13,832 in Centrica PLC on September 12, 2024 and sell it today you would lose (732.00) from holding Centrica PLC or give up 5.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.59% |
| Values | Daily Returns |
Centrica PLC vs. Martin Marietta Materials
Performance |
| Timeline |
| Centrica PLC |
| Martin Marietta Materials |
Centrica PLC and Martin Marietta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centrica PLC and Martin Marietta
The main advantage of trading using opposite Centrica PLC and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrica 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.| Centrica PLC vs. Odyssean Investment Trust | Centrica PLC vs. Sunny Optical Technology | Centrica PLC vs. Pfeiffer Vacuum Technology | Centrica PLC vs. FC Investment Trust |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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