Correlation Between Basic Materials and Martin Marietta

Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Martin Marietta into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Basic Materials and Martin Marietta Materials,, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Martin Marietta.

Diversification Opportunities for Basic Materials and Martin Marietta

-0.01

Correlation Coefficient

Basic Materials  Martin Marietta

Good diversification

The 3 months correlation between Basic and Martin is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Martin Marietta Materials, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Marietta Mate and Basic Materials 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 Basic Materials 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 Mate has no effect on the direction of Basic Materials i.e., Basic Materials and Martin Marietta go up and down completely randomly.

Pair Corralation between Basic Materials and Martin Marietta

Assuming the 90 days trading horizon Basic Materials is expected to generate 5.64 times less return on investment than Martin Marietta. But when comparing it to its historical volatility, Basic Materials is 1.42 times less risky than Martin Marietta. It trades about 0.02 of its potential returns per unit of risk. Martin Marietta Materials, is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  62,658  in Martin Marietta Materials, on May 28, 2025 and sell it today you would earn a total of  4,230  from holding Martin Marietta Materials, or generate 6.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Basic Materials  vs.  Martin Marietta Materials,

Pair Trading with Basic Materials and Martin Marietta

The main advantage of trading using opposite Basic Materials and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.

The idea behind Basic Materials and Martin Marietta Materials, 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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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.