Correlation Between Martin Marietta and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Martin Marietta and Southwest Airlines 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 Southwest Airlines 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 Southwest Airlines, you can compare the effects of market volatilities on Martin Marietta and Southwest Airlines 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 Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and Southwest Airlines.
Diversification Opportunities for Martin Marietta and Southwest Airlines
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Martin and Southwest is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines 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 Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of Martin Marietta i.e., Martin Marietta and Southwest Airlines go up and down completely randomly.
Pair Corralation between Martin Marietta and Southwest Airlines
Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 0.87 times more return on investment than Southwest Airlines. However, Martin Marietta Materials is 1.16 times less risky than Southwest Airlines. It trades about 0.2 of its potential returns per unit of risk. Southwest Airlines is currently generating about -0.1 per unit of risk. If you would invest 1,044,553 in Martin Marietta Materials on November 8, 2024 and sell it today you would earn a total of 56,331 from holding Martin Marietta Materials or generate 5.39% 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. Southwest Airlines
Performance |
| Timeline |
| Martin Marietta Materials |
| Southwest Airlines |
Martin Marietta and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and Southwest Airlines
The main advantage of trading using opposite Martin Marietta and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| Martin Marietta vs. Micron Technology | Martin Marietta vs. Cognizant Technology Solutions | Martin Marietta vs. Steel Dynamics | Martin Marietta vs. Delta Air Lines |
| Southwest Airlines vs. McEwen Mining | Southwest Airlines vs. Applied Materials | Southwest Airlines vs. Monster Beverage Corp | Southwest Airlines vs. Deutsche Bank Aktiengesellschaft |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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