Correlation Between Martin Marietta and Abbott Laboratories
Can any of the company-specific risk be diversified away by investing in both Martin Marietta and Abbott Laboratories 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 Martin Marietta and Abbott Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Martin Marietta Materials and Abbott Laboratories, you can compare the effects of market volatilities on Martin Marietta and Abbott Laboratories 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 Martin Marietta with a short position of Abbott Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and Abbott Laboratories.
Diversification Opportunities for Martin Marietta and Abbott Laboratories
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Martin and Abbott is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and Martin Marietta 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 Martin Marietta Materials are associated (or correlated) with Abbott Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abbott Laboratories has no effect on the direction of Martin Marietta i.e., Martin Marietta and Abbott Laboratories go up and down completely randomly.
Pair Corralation between Martin Marietta and Abbott Laboratories
Assuming the 90 days trading horizon Martin Marietta is expected to generate 9.43 times less return on investment than Abbott Laboratories. In addition to that, Martin Marietta is 1.18 times more volatile than Abbott Laboratories. It trades about 0.01 of its total potential returns per unit of risk. Abbott Laboratories is currently generating about 0.08 per unit of volatility. If you would invest 231,500 in Abbott Laboratories on August 31, 2024 and sell it today you would earn a total of 4,500 from holding Abbott Laboratories or generate 1.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Martin Marietta Materials vs. Abbott Laboratories
Performance |
| Timeline |
| Martin Marietta Materials |
| Abbott Laboratories |
Martin Marietta and Abbott Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and Abbott Laboratories
The main advantage of trading using opposite Martin Marietta and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, Abbott Laboratories 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 Abbott Laboratories will offset losses from the drop in Abbott Laboratories' long position.| Martin Marietta vs. TopBuild Corp | Martin Marietta vs. CEMEX SAB de | Martin Marietta vs. Grupo Cementos de | Martin Marietta vs. Grupo Lamosa SAB |
| Abbott Laboratories vs. Micron Technology | Abbott Laboratories vs. Martin Marietta Materials | Abbott Laboratories vs. McEwen Mining | Abbott Laboratories vs. Delta Air Lines |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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