Correlation Between 3M and Martin Marietta

Can any of the company-specific risk be diversified away by investing in both 3M 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 3M and Martin Marietta into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 3M Company and Martin Marietta Materials, you can compare the effects of market volatilities on 3M 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 3M with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Martin Marietta.

Diversification Opportunities for 3M and Martin Marietta

-0.38

Correlation Coefficient

3M  Martin Marietta

Very good diversification

The 3 months correlation between 3M and Martin is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company 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 3M 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 3M Company 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 3M i.e., 3M and Martin Marietta go up and down completely randomly.

Pair Corralation between 3M and Martin Marietta

Considering the 90-day investment horizon 3M Company is expected to generate 0.94 times more return on investment than Martin Marietta. However, 3M Company is 1.06 times less risky than Martin Marietta. It trades about 0.14 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about -0.1 per unit of risk. If you would invest  9,648  in 3M Company on March 4, 2024 and sell it today you would earn a total of  366.00  from holding 3M Company or generate 3.79% return on investment over 90 days.

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

3M Company  vs.  Martin Marietta Materials

3M Company

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, 3M displayed solid returns over the last few months and may actually be approaching a breakup point.

Martin Marietta Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Martin Marietta Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Martin Marietta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with 3M and Martin Marietta

The main advantage of trading using opposite 3M and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M 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 3M Company 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..