Correlation Between Martin Marietta and Novartis
Can any of the company-specific risk be diversified away by investing in both Martin Marietta and Novartis 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 Novartis 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 Novartis AG, you can compare the effects of market volatilities on Martin Marietta and Novartis 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 Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and Novartis.
Diversification Opportunities for Martin Marietta and Novartis
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Martin and Novartis is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG 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 Novartis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novartis AG has no effect on the direction of Martin Marietta i.e., Martin Marietta and Novartis go up and down completely randomly.
Pair Corralation between Martin Marietta and Novartis
Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 0.93 times more return on investment than Novartis. However, Martin Marietta Materials is 1.07 times less risky than Novartis. It trades about 0.07 of its potential returns per unit of risk. Novartis AG is currently generating about 0.04 per unit of risk. If you would invest 669,466 in Martin Marietta Materials on September 20, 2024 and sell it today you would earn a total of 445,391 from holding Martin Marietta Materials or generate 66.53% 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. Novartis AG
Performance |
| Timeline |
| Martin Marietta Materials |
| Novartis AG |
Martin Marietta and Novartis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and Novartis
The main advantage of trading using opposite Martin Marietta and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, Novartis 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 Novartis will offset losses from the drop in Novartis' long position.| Martin Marietta vs. Grupo Mxico SAB | Martin Marietta vs. Alfa SAB de | Martin Marietta vs. Grupo Financiero Banorte | Martin Marietta vs. Fomento Econmico Mexicano |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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