Correlation Between FutureFuel Corp and REX American
Can any of the company-specific risk be diversified away by investing in both FutureFuel Corp and REX American 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 REX American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FutureFuel Corp and REX American Resources, you can compare the effects of market volatilities on FutureFuel Corp and REX American 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 REX American. Check out your portfolio center. Please also check ongoing floating volatility patterns of FutureFuel Corp and REX American.
Diversification Opportunities for FutureFuel Corp and REX American
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FutureFuel and REX is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding FutureFuel Corp and REX American Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REX American Resources 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 REX American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REX American Resources has no effect on the direction of FutureFuel Corp i.e., FutureFuel Corp and REX American go up and down completely randomly.
Pair Corralation between FutureFuel Corp and REX American
Allowing for the 90-day total investment horizon FutureFuel Corp is expected to under-perform the REX American. In addition to that, FutureFuel Corp is 1.75 times more volatile than REX American Resources. It trades about -0.15 of its total potential returns per unit of risk. REX American Resources is currently generating about -0.06 per unit of volatility. If you would invest 4,491 in REX American Resources on August 31, 2024 and sell it today you would lose (166.00) from holding REX American Resources or give up 3.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FutureFuel Corp vs. REX American Resources
Performance |
| Timeline |
| FutureFuel Corp |
| REX American Resources |
FutureFuel Corp and REX American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FutureFuel Corp and REX American
The main advantage of trading using opposite FutureFuel Corp and REX American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FutureFuel Corp position performs unexpectedly, REX American 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 REX American will offset losses from the drop in REX American's long position.| FutureFuel Corp vs. Oil Dri | FutureFuel Corp vs. Quaker Chemical | FutureFuel Corp vs. Ecovyst | FutureFuel Corp vs. Minerals Technologies |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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