Correlation Between FutureFuel Corp and Nano One

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

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

Diversification Opportunities for FutureFuel Corp and Nano One

0.59

Correlation Coefficient

FutureFuel Corp  Nano One

Very weak diversification

The 3 months correlation between FutureFuel and Nano is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding FutureFuel Corp and Nano One Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nano One Materials 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 Nano One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nano One Materials has no effect on the direction of FutureFuel Corp i.e., FutureFuel Corp and Nano One go up and down completely randomly.

Pair Corralation between FutureFuel Corp and Nano One

Allowing for the 90-day total investment horizon FutureFuel Corp is expected to generate 0.58 times more return on investment than Nano One. However, FutureFuel Corp is 1.73 times less risky than Nano One. It trades about 0.07 of its potential returns per unit of risk. Nano One Materials is currently generating about -0.08 per unit of risk. If you would invest  429.00  in FutureFuel Corp on September 5, 2024 and sell it today you would earn a total of  95.00  from holding FutureFuel Corp or generate 22.14% return on investment over 90 days.

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

FutureFuel Corp  vs.  Nano One Materials

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.

Nano One Materials

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nano One Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Nano One reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FutureFuel Corp and Nano One

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

The idea behind FutureFuel Corp and Nano One 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.