Correlation Between Martin Marietta and International Business

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Can any of the company-specific risk be diversified away by investing in both Martin Marietta and International Business 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 International Business 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 International Business Machines, you can compare the effects of market volatilities on Martin Marietta and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Martin Marietta and International Business.

Diversification Opportunities for Martin Marietta and International Business

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Martin and International is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Martin Marietta Materials and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Martin Marietta i.e., Martin Marietta and International Business go up and down completely randomly.

Pair Corralation between Martin Marietta and International Business

Considering the 90-day investment horizon Martin Marietta Materials is expected to under-perform the International Business. In addition to that, Martin Marietta is 1.39 times more volatile than International Business Machines. It trades about -0.02 of its total potential returns per unit of risk. International Business Machines is currently generating about 0.07 per unit of volatility. If you would invest  11,721  in International Business Machines on September 4, 2022 and sell it today you would earn a total of  3,146  from holding International Business Machines or generate 26.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Martin Marietta Materials  vs.  International Business Machine

 Performance (%) 
       Timeline  
Martin Marietta Materials 
Martin Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish essential indicators, Martin Marietta may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Martin Price Channel

International Business 
International Performance
14 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile fundamental drivers, International Business revealed solid returns over the last few months and may actually be approaching a breakup point.

International Price Channel

Martin Marietta and International Business Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Martin Marietta and International Business

The main advantage of trading using opposite Martin Marietta and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Marietta position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.
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The idea behind Martin Marietta Materials and International Business Machines pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk 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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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