Correlation Between FutureFuel Corp and G6 Materials

Can any of the company-specific risk be diversified away by investing in both FutureFuel Corp and G6 Materials 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 G6 Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FutureFuel Corp and G6 Materials Corp, you can compare the effects of market volatilities on FutureFuel Corp and G6 Materials 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 G6 Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of FutureFuel Corp and G6 Materials.

Diversification Opportunities for FutureFuel Corp and G6 Materials

0.2

Correlation Coefficient

FutureFuel Corp  G6 Materials

Modest diversification

The 3 months correlation between FutureFuel and GPHBF is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding FutureFuel Corp and G6 Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G6 Materials Corp 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 G6 Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G6 Materials Corp has no effect on the direction of FutureFuel Corp i.e., FutureFuel Corp and G6 Materials go up and down completely randomly.

Pair Corralation between FutureFuel Corp and G6 Materials

Allowing for the 90-day total investment horizon FutureFuel Corp is expected to generate 112.82 times less return on investment than G6 Materials. But when comparing it to its historical volatility, FutureFuel Corp is 22.03 times less risky than G6 Materials. It trades about 0.01 of its potential returns per unit of risk. G6 Materials Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  35.00  in G6 Materials Corp on September 5, 2024 and sell it today you would lose (31.90) from holding G6 Materials Corp or give up 91.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

FutureFuel Corp  vs.  G6 Materials Corp

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.

G6 Materials Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G6 Materials Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with FutureFuel Corp and G6 Materials

The main advantage of trading using opposite FutureFuel Corp and G6 Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FutureFuel Corp position performs unexpectedly, G6 Materials 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 G6 Materials will offset losses from the drop in G6 Materials' long position.

The idea behind FutureFuel Corp and G6 Materials Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.