Correlation Between Ford and Martin Marietta
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Martin Marietta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Martin Marietta Materials, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Martin Marietta.
Diversification Opportunities for Ford and Martin Marietta
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Martin is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Martin Marietta go up and down completely randomly.
Pair Corralation between Ford and Martin Marietta
Taking into account the 90-day investment horizon Ford is expected to generate 5.59 times less return on investment than Martin Marietta. In addition to that, Ford is 1.68 times more volatile than Martin Marietta Materials. It trades about 0.03 of its total potential returns per unit of risk. Martin Marietta Materials is currently generating about 0.25 per unit of volatility. If you would invest 52,500 in Martin Marietta Materials on August 25, 2024 and sell it today you would earn a total of 4,780 from holding Martin Marietta Materials or generate 9.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Martin Marietta Materials
Performance |
| Timeline |
| Ford Motor |
| Martin Marietta Materials |
Ford and Martin Marietta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Martin Marietta
The main advantage of trading using opposite Ford and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| Martin Marietta vs. Mitsui Chemicals | Martin Marietta vs. OFFICE DEPOT | Martin Marietta vs. Quaker Chemical | Martin Marietta vs. Sekisui Chemical Co |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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