Correlation Between Martin Marietta and China Resources
Can any of the company-specific risk be diversified away by investing in both Martin Marietta and China Resources 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 China Resources 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 China Resources Beer, you can compare the effects of market volatilities on Martin Marietta and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and China Resources.
Diversification Opportunities for Martin Marietta and China Resources
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Martin and China is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Martin Marietta i.e., Martin Marietta and China Resources go up and down completely randomly.
Pair Corralation between Martin Marietta and China Resources
Assuming the 90 days trading horizon Martin Marietta Materials is expected to generate 0.44 times more return on investment than China Resources. However, Martin Marietta Materials is 2.28 times less risky than China Resources. It trades about 0.19 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.17 per unit of risk. If you would invest 53,440 in Martin Marietta Materials on August 29, 2024 and sell it today you would earn a total of 3,520 from holding Martin Marietta Materials or generate 6.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Martin Marietta Materials vs. China Resources Beer
Performance |
| Timeline |
| Martin Marietta Materials |
| China Resources Beer |
Martin Marietta and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and China Resources
The main advantage of trading using opposite Martin Marietta and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.| Martin Marietta vs. Apple Inc | Martin Marietta vs. Apple Inc | Martin Marietta vs. Apple Inc | Martin Marietta vs. Apple Inc |
| China Resources vs. Diamyd Medical AB | China Resources vs. Monster Beverage Corp | China Resources vs. Dairy Farm International | China Resources vs. INDOFOOD AGRI RES |
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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