Correlation Between Avantor and FutureFuel Corp
Can any of the company-specific risk be diversified away by investing in both Avantor 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 Avantor and FutureFuel Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avantor and FutureFuel Corp, you can compare the effects of market volatilities on Avantor 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 Avantor with a short position of FutureFuel Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantor and FutureFuel Corp.
Diversification Opportunities for Avantor and FutureFuel Corp
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Avantor and FutureFuel is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Avantor and FutureFuel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FutureFuel Corp and Avantor 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 Avantor 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 Avantor i.e., Avantor and FutureFuel Corp go up and down completely randomly.
Pair Corralation between Avantor and FutureFuel Corp
Given the investment horizon of 90 days Avantor is expected to generate 0.36 times more return on investment than FutureFuel Corp. However, Avantor is 2.8 times less risky than FutureFuel Corp. It trades about -0.2 of its potential returns per unit of risk. FutureFuel Corp is currently generating about -0.15 per unit of risk. If you would invest 2,246 in Avantor on August 31, 2024 and sell it today you would lose (142.00) from holding Avantor or give up 6.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avantor vs. FutureFuel Corp
Performance |
| Timeline |
| Avantor |
| FutureFuel Corp |
Avantor and FutureFuel Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avantor and FutureFuel Corp
The main advantage of trading using opposite Avantor and FutureFuel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantor 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.| Avantor vs. Ashland Global Holdings | Avantor vs. H B Fuller | Avantor vs. Element Solutions | Avantor vs. Balchem |
| FutureFuel Corp vs. Oil Dri | FutureFuel Corp vs. Quaker Chemical | FutureFuel Corp vs. Ecovyst | FutureFuel Corp vs. Minerals Technologies |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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