Correlation Between GrafTech International and AdvanSix

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

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

Diversification Opportunities for GrafTech International and AdvanSix

0.29

Correlation Coefficient

GrafTech International  AdvanSix

Modest diversification

The 3 months correlation between GrafTech and AdvanSix is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding GrafTech International and AdvanSix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvanSix and GrafTech International 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 GrafTech International are associated (or correlated) with AdvanSix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvanSix has no effect on the direction of GrafTech International i.e., GrafTech International and AdvanSix go up and down completely randomly.

Pair Corralation between GrafTech International and AdvanSix

Considering the 90-day investment horizon GrafTech International is expected to generate 3.38 times more return on investment than AdvanSix. However, GrafTech International is 3.38 times more volatile than AdvanSix. It trades about 0.09 of its potential returns per unit of risk. AdvanSix is currently generating about -0.05 per unit of risk. If you would invest  132.00  in GrafTech International on September 30, 2024 and sell it today you would earn a total of  35.00  from holding GrafTech International or generate 26.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

GrafTech International  vs.  AdvanSix

GrafTech International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GrafTech International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, GrafTech International reported solid returns over the last few months and may actually be approaching a breakup point.

AdvanSix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdvanSix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, AdvanSix is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GrafTech International and AdvanSix

The main advantage of trading using opposite GrafTech International and AdvanSix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GrafTech International position performs unexpectedly, AdvanSix 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 AdvanSix will offset losses from the drop in AdvanSix's long position.

The idea behind GrafTech International and AdvanSix 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.