Correlation Between Martin Marietta and NextEra Energy
Can any of the company-specific risk be diversified away by investing in both Martin Marietta and NextEra Energy 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 NextEra Energy 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 NextEra Energy, you can compare the effects of market volatilities on Martin Marietta and NextEra Energy 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 NextEra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and NextEra Energy.
Diversification Opportunities for Martin Marietta and NextEra Energy
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Martin and NextEra is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and NextEra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextEra Energy 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 NextEra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextEra Energy has no effect on the direction of Martin Marietta i.e., Martin Marietta and NextEra Energy go up and down completely randomly.
Pair Corralation between Martin Marietta and NextEra Energy
If you would invest 50,060 in Martin Marietta Materials on November 5, 2024 and sell it today you would earn a total of 2,220 from holding Martin Marietta Materials or generate 4.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Martin Marietta Materials vs. NextEra Energy
Performance |
| Timeline |
| Martin Marietta Materials |
| NextEra Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Martin Marietta and NextEra Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and NextEra Energy
The main advantage of trading using opposite Martin Marietta and NextEra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, NextEra Energy 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 NextEra Energy will offset losses from the drop in NextEra Energy's long position.| Martin Marietta vs. China Eastern Airlines | Martin Marietta vs. The Yokohama Rubber | Martin Marietta vs. American Airlines Group | Martin Marietta vs. Heidelberg Materials AG |
| NextEra Energy vs. FIREWEED METALS P | NextEra Energy vs. PRECISION DRILLING P | NextEra Energy vs. Pembina Pipeline Corp | NextEra Energy vs. GRIFFIN MINING LTD |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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