Correlation Between Martin Marietta and BHP Group
Can any of the company-specific risk be diversified away by investing in both Martin Marietta and BHP Group 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 BHP Group 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 BHP Group Limited, you can compare the effects of market volatilities on Martin Marietta and BHP Group 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 BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and BHP Group.
Diversification Opportunities for Martin Marietta and BHP Group
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Martin and BHP is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited 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 BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Martin Marietta i.e., Martin Marietta and BHP Group go up and down completely randomly.
Pair Corralation between Martin Marietta and BHP Group
Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 1.16 times more return on investment than BHP Group. However, Martin Marietta is 1.16 times more volatile than BHP Group Limited. It trades about 0.14 of its potential returns per unit of risk. BHP Group Limited is currently generating about -0.01 per unit of risk. If you would invest 50,060 in Martin Marietta Materials on November 7, 2024 and sell it today you would earn a total of 1,740 from holding Martin Marietta Materials or generate 3.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Martin Marietta Materials vs. BHP Group Limited
Performance |
| Timeline |
| Martin Marietta Materials |
| BHP Group Limited |
Martin Marietta and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and BHP Group
The main advantage of trading using opposite Martin Marietta and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, BHP Group 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 BHP Group will offset losses from the drop in BHP Group's long position.| Martin Marietta vs. INTER CARS SA | Martin Marietta vs. Grupo Carso SAB | Martin Marietta vs. Casio Computer CoLtd | Martin Marietta vs. Align Technology |
| BHP Group vs. Playtech plc | BHP Group vs. CITY OFFICE REIT | BHP Group vs. PLAYTIKA HOLDING DL 01 | BHP Group vs. EEDUCATION ALBERT AB |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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