Correlation Between FutureFuel Corp and Smith Midland
Can any of the company-specific risk be diversified away by investing in both FutureFuel Corp and Smith Midland 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 Smith Midland into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FutureFuel Corp and Smith Midland Corp, you can compare the effects of market volatilities on FutureFuel Corp and Smith Midland 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 Smith Midland. Check out your portfolio center. Please also check ongoing floating volatility patterns of FutureFuel Corp and Smith Midland.
Diversification Opportunities for FutureFuel Corp and Smith Midland
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between FutureFuel and Smith is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding FutureFuel Corp and Smith Midland Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Midland Corp 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 Smith Midland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Midland Corp has no effect on the direction of FutureFuel Corp i.e., FutureFuel Corp and Smith Midland go up and down completely randomly.
Pair Corralation between FutureFuel Corp and Smith Midland
Allowing for the 90-day total investment horizon FutureFuel Corp is expected to under-perform the Smith Midland. But the stock apears to be less risky and, when comparing its historical volatility, FutureFuel Corp is 1.26 times less risky than Smith Midland. The stock trades about -0.15 of its potential returns per unit of risk. The Smith Midland Corp is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 3,379 in Smith Midland Corp on August 31, 2024 and sell it today you would earn a total of 1,461 from holding Smith Midland Corp or generate 43.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FutureFuel Corp vs. Smith Midland Corp
Performance |
| Timeline |
| FutureFuel Corp |
| Smith Midland Corp |
FutureFuel Corp and Smith Midland Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FutureFuel Corp and Smith Midland
The main advantage of trading using opposite FutureFuel Corp and Smith Midland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FutureFuel Corp position performs unexpectedly, Smith Midland 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 Smith Midland will offset losses from the drop in Smith Midland'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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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