Correlation Between Martin Marietta and CVS Health
Can any of the company-specific risk be diversified away by investing in both Martin Marietta and CVS Health 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 CVS Health 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 CVS Health, you can compare the effects of market volatilities on Martin Marietta and CVS Health 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 CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and CVS Health.
Diversification Opportunities for Martin Marietta and CVS Health
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Martin and CVS is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health has no effect on the direction of Martin Marietta i.e., Martin Marietta and CVS Health go up and down completely randomly.
Pair Corralation between Martin Marietta and CVS Health
Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 0.95 times more return on investment than CVS Health. However, Martin Marietta Materials is 1.06 times less risky than CVS Health. It trades about 0.08 of its potential returns per unit of risk. CVS Health is currently generating about 0.07 per unit of risk. If you would invest 1,008,991 in Martin Marietta Materials on August 30, 2024 and sell it today you would earn a total of 203,509 from holding Martin Marietta Materials or generate 20.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Martin Marietta Materials vs. CVS Health
Performance |
| Timeline |
| Martin Marietta Materials |
| CVS Health |
Martin Marietta and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and CVS Health
The main advantage of trading using opposite Martin Marietta and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.The idea behind Martin Marietta Materials and CVS Health 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.| CVS Health vs. Southern Copper | CVS Health vs. Grupo Sports World | CVS Health vs. Monster Beverage Corp | CVS Health vs. Cognizant Technology Solutions |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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