Correlation Between United Utilities and Martin Marietta
Can any of the company-specific risk be diversified away by investing in both United Utilities and Martin Marietta 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 United Utilities and Martin Marietta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Utilities Group and Martin Marietta Materials, you can compare the effects of market volatilities on United Utilities and Martin Marietta 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 United Utilities with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Martin Marietta.
Diversification Opportunities for United Utilities and Martin Marietta
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Martin is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Martin Marietta Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Marietta Materials and United Utilities 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 United Utilities Group are associated (or correlated) with Martin Marietta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Marietta Materials has no effect on the direction of United Utilities i.e., United Utilities and Martin Marietta go up and down completely randomly.
Pair Corralation between United Utilities and Martin Marietta
Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.76 times more return on investment than Martin Marietta. However, United Utilities Group is 1.32 times less risky than Martin Marietta. It trades about 0.32 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about 0.06 per unit of risk. If you would invest 101,826 in United Utilities Group on September 2, 2024 and sell it today you would earn a total of 10,124 from holding United Utilities Group or generate 9.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
United Utilities Group vs. Martin Marietta Materials
Performance |
| Timeline |
| United Utilities |
| Martin Marietta Materials |
United Utilities and Martin Marietta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Martin Marietta
The main advantage of trading using opposite United Utilities and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Martin Marietta 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 Martin Marietta will offset losses from the drop in Martin Marietta's long position.| United Utilities vs. Monks Investment Trust | United Utilities vs. Smithson Investment Trust | United Utilities vs. Ebro Foods | United Utilities vs. Federal Realty Investment |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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