Correlation Between Gevo and 5E Advanced
Can any of the company-specific risk be diversified away by investing in both Gevo and 5E Advanced 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 Gevo and 5E Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gevo Inc and 5E Advanced Materials, you can compare the effects of market volatilities on Gevo and 5E Advanced 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 Gevo with a short position of 5E Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gevo and 5E Advanced.
Diversification Opportunities for Gevo and 5E Advanced
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gevo and FEAM is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Gevo Inc and 5E Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 5E Advanced Materials and Gevo 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 Gevo Inc are associated (or correlated) with 5E Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 5E Advanced Materials has no effect on the direction of Gevo i.e., Gevo and 5E Advanced go up and down completely randomly.
Pair Corralation between Gevo and 5E Advanced
Given the investment horizon of 90 days Gevo Inc is expected to under-perform the 5E Advanced. In addition to that, Gevo is 2.15 times more volatile than 5E Advanced Materials. It trades about -0.27 of its total potential returns per unit of risk. 5E Advanced Materials is currently generating about -0.02 per unit of volatility. If you would invest 52.00 in 5E Advanced Materials on August 27, 2024 and sell it today you would lose (2.00) from holding 5E Advanced Materials or give up 3.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gevo Inc vs. 5E Advanced Materials
Performance |
| Timeline |
| Gevo Inc |
| 5E Advanced Materials |
Gevo and 5E Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gevo and 5E Advanced
The main advantage of trading using opposite Gevo and 5E Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gevo position performs unexpectedly, 5E Advanced 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 5E Advanced will offset losses from the drop in 5E Advanced's long position.| Gevo vs. REX American Resources | Gevo vs. Axalta Coating Systems | Gevo vs. Avantor | Gevo vs. FutureFuel Corp |
| 5E Advanced vs. Innospec | 5E Advanced vs. Minerals Technologies | 5E Advanced vs. Oil Dri | 5E Advanced vs. Quaker Chemical |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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