Correlation Between FutureFuel Corp and Hawkins

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

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

Diversification Opportunities for FutureFuel Corp and Hawkins

-0.37

Correlation Coefficient

FutureFuel Corp  Hawkins

Very good diversification

The 3 months correlation between FutureFuel and Hawkins is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding FutureFuel Corp and Hawkins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawkins 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 Hawkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawkins has no effect on the direction of FutureFuel Corp i.e., FutureFuel Corp and Hawkins go up and down completely randomly.

Pair Corralation between FutureFuel Corp and Hawkins

Allowing for the 90-day total investment horizon FutureFuel Corp is expected to under-perform the Hawkins. In addition to that, FutureFuel Corp is 1.16 times more volatile than Hawkins. It trades about -0.01 of its total potential returns per unit of risk. Hawkins is currently generating about 0.09 per unit of volatility. If you would invest  11,677  in Hawkins on September 12, 2024 and sell it today you would earn a total of  1,575  from holding Hawkins or generate 13.49% return on investment over 90 days.

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

FutureFuel Corp  vs.  Hawkins

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 nearly stable technical and fundamental indicators, FutureFuel Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Hawkins

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hawkins are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting forward-looking signals, Hawkins displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FutureFuel Corp and Hawkins

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

The idea behind FutureFuel Corp and Hawkins 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.