Correlation Between Martin Marietta and Disney
Can any of the company-specific risk be diversified away by investing in both Martin Marietta and Disney 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 Disney 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 The Walt Disney, you can compare the effects of market volatilities on Martin Marietta and Disney 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 Disney. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and Disney.
Diversification Opportunities for Martin Marietta and Disney
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Martin and Disney is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and The Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney 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 Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of Martin Marietta i.e., Martin Marietta and Disney go up and down completely randomly.
Pair Corralation between Martin Marietta and Disney
Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 0.82 times more return on investment than Disney. However, Martin Marietta Materials is 1.22 times less risky than Disney. It trades about 0.09 of its potential returns per unit of risk. The Walt Disney is currently generating about 0.04 per unit of risk. If you would invest 670,358 in Martin Marietta Materials on September 3, 2024 and sell it today you would earn a total of 545,702 from holding Martin Marietta Materials or generate 81.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Martin Marietta Materials vs. The Walt Disney
Performance |
| Timeline |
| Martin Marietta Materials |
| Walt Disney |
Martin Marietta and Disney Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and Disney
The main advantage of trading using opposite Martin Marietta and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, Disney 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 Disney will offset losses from the drop in Disney's long position.| Martin Marietta vs. TopBuild Corp | Martin Marietta vs. CEMEX SAB de | Martin Marietta vs. Grupo Lamosa SAB | Martin Marietta vs. Internacional de Cermica |
| Disney vs. Martin Marietta Materials | Disney vs. Ameriprise Financial | Disney vs. Prudential Financial | Disney vs. Monster Beverage Corp |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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