Correlation Between Martin Marietta and Microsoft
Can any of the company-specific risk be diversified away by investing in both Martin Marietta and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on Martin Marietta and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and Microsoft.
Diversification Opportunities for Martin Marietta and Microsoft
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Martin and Microsoft is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Martin Marietta i.e., Martin Marietta and Microsoft go up and down completely randomly.
Pair Corralation between Martin Marietta and Microsoft
Assuming the 90 days trading horizon Martin Marietta is expected to generate 1.34 times less return on investment than Microsoft. In addition to that, Martin Marietta is 1.07 times more volatile than Microsoft. It trades about 0.07 of its total potential returns per unit of risk. Microsoft is currently generating about 0.1 per unit of volatility. If you would invest 21,612 in Microsoft on October 11, 2024 and sell it today you would earn a total of 19,483 from holding Microsoft or generate 90.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Martin Marietta Materials vs. Microsoft
Performance |
| Timeline |
| Martin Marietta Materials |
| Microsoft |
Martin Marietta and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and Microsoft
The main advantage of trading using opposite Martin Marietta and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Martin Marietta vs. BioNTech SE | Martin Marietta vs. United Rentals | Martin Marietta vs. ASPEN TECHINC DL | Martin Marietta vs. Lendlease Group |
| Microsoft vs. Canadian Utilities Limited | Microsoft vs. Chesapeake Utilities | Microsoft vs. Goodyear Tire Rubber | Microsoft vs. Martin Marietta Materials |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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