Correlation Between G6 Materials and FutureFuel Corp

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

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

Diversification Opportunities for G6 Materials and FutureFuel Corp

0.2

Correlation Coefficient

G6 Materials  FutureFuel Corp

Modest diversification

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

Pair Corralation between G6 Materials and FutureFuel Corp

Assuming the 90 days horizon G6 Materials Corp is expected to generate 22.03 times more return on investment than FutureFuel Corp. However, G6 Materials is 22.03 times more volatile than FutureFuel Corp. It trades about 0.06 of its potential returns per unit of risk. FutureFuel Corp is currently generating about 0.01 per unit of risk. 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

G6 Materials Corp  vs.  FutureFuel Corp

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.

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.

Pair Trading with G6 Materials and FutureFuel Corp

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

The idea behind G6 Materials Corp and FutureFuel 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.