Correlation Between FutureFuel Corp and H B

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

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

Diversification Opportunities for FutureFuel Corp and H B

0.15

Correlation Coefficient

FutureFuel Corp  H B

Average diversification

The 3 months correlation between FutureFuel and FUL is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding FutureFuel Corp and H B Fuller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H B Fuller and FutureFuel Corp 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 FutureFuel Corp are associated (or correlated) with H B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H B Fuller has no effect on the direction of FutureFuel Corp i.e., FutureFuel Corp and H B go up and down completely randomly.

Pair Corralation between FutureFuel Corp and H B

Allowing for the 90-day total investment horizon FutureFuel Corp is expected to generate 1.8 times more return on investment than H B. However, FutureFuel Corp is 1.8 times more volatile than H B Fuller. It trades about 0.01 of its potential returns per unit of risk. H B Fuller is currently generating about 0.01 per unit of risk. If you would invest  546.00  in FutureFuel Corp on September 5, 2024 and sell it today you would lose (22.00) from holding FutureFuel Corp or give up 4.03% of portfolio value over 90 days.

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

FutureFuel Corp  vs.  H B Fuller

FutureFuel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FutureFuel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

H B Fuller

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H B Fuller has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, H B is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with FutureFuel Corp and H B

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

The idea behind FutureFuel Corp and H B Fuller 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.