Correlation Between H B and Blue Biofuels

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

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

Diversification Opportunities for H B and Blue Biofuels

0.07

Correlation Coefficient

H B  Blue Biofuels

Significant diversification

The 3 months correlation between FUL and Blue is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding H B Fuller and Blue Biofuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Biofuels and H B 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 H B Fuller are associated (or correlated) with Blue Biofuels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Biofuels has no effect on the direction of H B i.e., H B and Blue Biofuels go up and down completely randomly.

Pair Corralation between H B and Blue Biofuels

Considering the 90-day investment horizon H B Fuller is expected to under-perform the Blue Biofuels. But the stock apears to be less risky and, when comparing its historical volatility, H B Fuller is 4.07 times less risky than Blue Biofuels. The stock trades about -0.03 of its potential returns per unit of risk. The Blue Biofuels is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Blue Biofuels on September 15, 2024 and sell it today you would earn a total of  4.00  from holding Blue Biofuels or generate 50.0% return on investment over 90 days.

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

H B Fuller  vs.  Blue Biofuels

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 latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Blue Biofuels

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Biofuels are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Blue Biofuels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with H B and Blue Biofuels

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

The idea behind H B Fuller and Blue Biofuels 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.