Correlation Between Martin Marietta and US Bancorp
Can any of the company-specific risk be diversified away by investing in both Martin Marietta and US Bancorp 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 US Bancorp 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 US Bancorp, you can compare the effects of market volatilities on Martin Marietta and US Bancorp 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 US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and US Bancorp.
Diversification Opportunities for Martin Marietta and US Bancorp
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Martin and UB5 is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Martin Marietta i.e., Martin Marietta and US Bancorp go up and down completely randomly.
Pair Corralation between Martin Marietta and US Bancorp
Assuming the 90 days trading horizon Martin Marietta is expected to generate 2.83 times less return on investment than US Bancorp. But when comparing it to its historical volatility, Martin Marietta Materials is 1.5 times less risky than US Bancorp. It trades about 0.14 of its potential returns per unit of risk. US Bancorp is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 4,370 in US Bancorp on September 5, 2024 and sell it today you would earn a total of 635.00 from holding US Bancorp or generate 14.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Martin Marietta Materials vs. US Bancorp
Performance |
| Timeline |
| Martin Marietta Materials |
| US Bancorp |
Martin Marietta and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Martin Marietta and US Bancorp
The main advantage of trading using opposite Martin Marietta and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.| Martin Marietta vs. Insteel Industries | Martin Marietta vs. BLUESCOPE STEEL | Martin Marietta vs. KINGBOARD CHEMICAL | Martin Marietta vs. CECO ENVIRONMENTAL |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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