Correlation Between Carsales and Martin Marietta
Can any of the company-specific risk be diversified away by investing in both Carsales 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 Carsales and Martin Marietta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carsales and Martin Marietta Materials, you can compare the effects of market volatilities on Carsales 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 Carsales with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Martin Marietta.
Diversification Opportunities for Carsales and Martin Marietta
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Carsales and Martin is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Carsales 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 Carsales 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 Carsales 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 Carsales i.e., Carsales and Martin Marietta go up and down completely randomly.
Pair Corralation between Carsales and Martin Marietta
Assuming the 90 days trading horizon Carsales is expected to generate 1.93 times more return on investment than Martin Marietta. However, Carsales is 1.93 times more volatile than Martin Marietta Materials. It trades about 0.19 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about 0.18 per unit of risk. If you would invest 2,220 in Carsales on November 6, 2024 and sell it today you would earn a total of 200.00 from holding Carsales or generate 9.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carsales vs. Martin Marietta Materials
Performance |
| Timeline |
| Carsales |
| Martin Marietta Materials |
Carsales and Martin Marietta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Martin Marietta
The main advantage of trading using opposite Carsales and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales 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.| Carsales vs. PLANT VEDA FOODS | Carsales vs. Molson Coors Beverage | Carsales vs. Moneysupermarket Group PLC | Carsales vs. VARIOUS EATERIES LS |
| Martin Marietta vs. INTER CARS SA | Martin Marietta vs. Grupo Carso SAB | Martin Marietta vs. Casio Computer CoLtd | Martin Marietta vs. Align Technology |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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