Correlation Between Martin Marietta and Diageo Plc
Can any of the company-specific risk be diversified away by investing in both Martin Marietta and Diageo Plc 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 Diageo Plc 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 Diageo plc, you can compare the effects of market volatilities on Martin Marietta and Diageo Plc 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 Diageo Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and Diageo Plc.
Diversification Opportunities for Martin Marietta and Diageo Plc
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Martin and Diageo is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Diageo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc 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 Diageo Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo plc has no effect on the direction of Martin Marietta i.e., Martin Marietta and Diageo Plc go up and down completely randomly.
Pair Corralation between Martin Marietta and Diageo Plc
Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 1.53 times more return on investment than Diageo Plc. However, Martin Marietta is 1.53 times more volatile than Diageo plc. It trades about -0.03 of its potential returns per unit of risk. Diageo plc is currently generating about -0.27 per unit of risk. If you would invest 1,114,857 in Martin Marietta Materials on October 26, 2024 and sell it today you would lose (17,308) from holding Martin Marietta Materials or give up 1.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Martin Marietta Materials vs. Diageo plc
Performance |
| Timeline |
| Martin Marietta Materials |
| Diageo plc |
Martin Marietta and Diageo Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and Diageo Plc
The main advantage of trading using opposite Martin Marietta and Diageo Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, Diageo Plc 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 Diageo Plc will offset losses from the drop in Diageo Plc's long position.| Martin Marietta vs. Grupo Sports World | Martin Marietta vs. McEwen Mining | Martin Marietta vs. Southwest Airlines | Martin Marietta vs. Cognizant Technology Solutions |
| Diageo Plc vs. Taiwan Semiconductor Manufacturing | Diageo Plc vs. Grupo Industrial Saltillo | Diageo Plc vs. DXC Technology | Diageo Plc vs. Martin Marietta Materials |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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