Correlation Between Martin Marietta and GOODYEAR T
Can any of the company-specific risk be diversified away by investing in both Martin Marietta and GOODYEAR T 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 GOODYEAR T 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 GOODYEAR T RUBBER, you can compare the effects of market volatilities on Martin Marietta and GOODYEAR T 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 GOODYEAR T. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and GOODYEAR T.
Diversification Opportunities for Martin Marietta and GOODYEAR T
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Martin and GOODYEAR is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and GOODYEAR T RUBBER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOODYEAR T RUBBER 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 GOODYEAR T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOODYEAR T RUBBER has no effect on the direction of Martin Marietta i.e., Martin Marietta and GOODYEAR T go up and down completely randomly.
Pair Corralation between Martin Marietta and GOODYEAR T
Assuming the 90 days trading horizon Martin Marietta Materials is expected to under-perform the GOODYEAR T. But the stock apears to be less risky and, when comparing its historical volatility, Martin Marietta Materials is 2.7 times less risky than GOODYEAR T. The stock trades about -0.32 of its potential returns per unit of risk. The GOODYEAR T RUBBER is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 922.00 in GOODYEAR T RUBBER on September 12, 2024 and sell it today you would earn a total of 41.00 from holding GOODYEAR T RUBBER or generate 4.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Martin Marietta Materials vs. GOODYEAR T RUBBER
Performance |
| Timeline |
| Martin Marietta Materials |
| GOODYEAR T RUBBER |
Martin Marietta and GOODYEAR T Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and GOODYEAR T
The main advantage of trading using opposite Martin Marietta and GOODYEAR T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, GOODYEAR T 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 GOODYEAR T will offset losses from the drop in GOODYEAR T's long position.| Martin Marietta vs. Apple Inc | Martin Marietta vs. Apple Inc | Martin Marietta vs. Apple Inc | Martin Marietta vs. Apple Inc |
| GOODYEAR T vs. Lion One Metals | GOODYEAR T vs. National Health Investors | GOODYEAR T vs. ATRYS HEALTH SA | GOODYEAR T vs. Platinum Investment Management |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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