Correlation Between Martin Marietta and NetEase
Can any of the company-specific risk be diversified away by investing in both Martin Marietta and NetEase 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 NetEase 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 NetEase, you can compare the effects of market volatilities on Martin Marietta and NetEase 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 NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and NetEase.
Diversification Opportunities for Martin Marietta and NetEase
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Martin and NetEase is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase 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 NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of Martin Marietta i.e., Martin Marietta and NetEase go up and down completely randomly.
Pair Corralation between Martin Marietta and NetEase
Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 9.0 times more return on investment than NetEase. However, Martin Marietta is 9.0 times more volatile than NetEase. It trades about 0.1 of its potential returns per unit of risk. NetEase is currently generating about 0.32 per unit of risk. If you would invest 1,185,326 in Martin Marietta Materials on September 4, 2024 and sell it today you would earn a total of 30,655 from holding Martin Marietta Materials or generate 2.59% 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. NetEase
Performance |
| Timeline |
| Martin Marietta Materials |
| NetEase |
Martin Marietta and NetEase Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and NetEase
The main advantage of trading using opposite Martin Marietta and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, NetEase 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 NetEase will offset losses from the drop in NetEase's long position.| Martin Marietta vs. Prudential Financial | Martin Marietta vs. Deutsche Bank Aktiengesellschaft | Martin Marietta vs. Verizon Communications | Martin Marietta vs. DXC Technology |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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