Correlation Between Costco Wholesale and Martin Marietta
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale 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 Costco Wholesale and Martin Marietta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and Martin Marietta Materials, you can compare the effects of market volatilities on Costco Wholesale 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 Costco Wholesale with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Martin Marietta.
Diversification Opportunities for Costco Wholesale and Martin Marietta
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Costco and Martin is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale 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 Costco Wholesale 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 Costco Wholesale 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 Costco Wholesale i.e., Costco Wholesale and Martin Marietta go up and down completely randomly.
Pair Corralation between Costco Wholesale and Martin Marietta
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 1.41 times more return on investment than Martin Marietta. However, Costco Wholesale is 1.41 times more volatile than Martin Marietta Materials. It trades about 0.28 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about 0.01 per unit of risk. If you would invest 1,772,850 in Costco Wholesale on August 31, 2024 and sell it today you would earn a total of 207,650 from holding Costco Wholesale or generate 11.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Costco Wholesale vs. Martin Marietta Materials
Performance |
| Timeline |
| Costco Wholesale |
| Martin Marietta Materials |
Costco Wholesale and Martin Marietta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Martin Marietta
The main advantage of trading using opposite Costco Wholesale and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale 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.| Costco Wholesale vs. Verizon Communications | Costco Wholesale vs. First Republic Bank | Costco Wholesale vs. First Majestic Silver | Costco Wholesale vs. Monster Beverage Corp |
| Martin Marietta vs. TopBuild Corp | Martin Marietta vs. CEMEX SAB de | Martin Marietta vs. Grupo Cementos de | Martin Marietta vs. Grupo Lamosa SAB |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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