Correlation Between FutureFuel Corp and Avantor
Can any of the company-specific risk be diversified away by investing in both FutureFuel Corp and Avantor 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 Avantor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FutureFuel Corp and Avantor, you can compare the effects of market volatilities on FutureFuel Corp and Avantor 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 Avantor. Check out your portfolio center. Please also check ongoing floating volatility patterns of FutureFuel Corp and Avantor.
Diversification Opportunities for FutureFuel Corp and Avantor
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between FutureFuel and Avantor is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding FutureFuel Corp and Avantor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantor 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 Avantor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantor has no effect on the direction of FutureFuel Corp i.e., FutureFuel Corp and Avantor go up and down completely randomly.
Pair Corralation between FutureFuel Corp and Avantor
Allowing for the 90-day total investment horizon FutureFuel Corp is expected to under-perform the Avantor. In addition to that, FutureFuel Corp is 2.8 times more volatile than Avantor. It trades about -0.15 of its total potential returns per unit of risk. Avantor is currently generating about -0.2 per unit of volatility. 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 |
FutureFuel Corp vs. Avantor
Performance |
| Timeline |
| FutureFuel Corp |
| Avantor |
FutureFuel Corp and Avantor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FutureFuel Corp and Avantor
The main advantage of trading using opposite FutureFuel Corp and Avantor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FutureFuel Corp position performs unexpectedly, Avantor 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 Avantor will offset losses from the drop in Avantor's long position.| FutureFuel Corp vs. Oil Dri | FutureFuel Corp vs. Quaker Chemical | FutureFuel Corp vs. Ecovyst | FutureFuel Corp vs. Minerals Technologies |
| Avantor vs. Ashland Global Holdings | Avantor vs. H B Fuller | Avantor vs. Element Solutions | Avantor vs. Balchem |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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