Correlation Between Innospec and FutureFuel Corp
Can any of the company-specific risk be diversified away by investing in both Innospec 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 Innospec and FutureFuel Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innospec and FutureFuel Corp, you can compare the effects of market volatilities on Innospec 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 Innospec with a short position of FutureFuel Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innospec and FutureFuel Corp.
Diversification Opportunities for Innospec and FutureFuel Corp
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Innospec and FutureFuel is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Innospec and FutureFuel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FutureFuel Corp and Innospec 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 Innospec 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 Innospec i.e., Innospec and FutureFuel Corp go up and down completely randomly.
Pair Corralation between Innospec and FutureFuel Corp
Given the investment horizon of 90 days Innospec is expected to generate 2.02 times less return on investment than FutureFuel Corp. But when comparing it to its historical volatility, Innospec is 1.69 times less risky than FutureFuel Corp. It trades about 0.04 of its potential returns per unit of risk. FutureFuel Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 402.00 in FutureFuel Corp on August 24, 2024 and sell it today you would earn a total of 112.00 from holding FutureFuel Corp or generate 27.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Innospec vs. FutureFuel Corp
Performance |
| Timeline |
| Innospec |
| FutureFuel Corp |
Innospec and FutureFuel Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innospec and FutureFuel Corp
The main advantage of trading using opposite Innospec and FutureFuel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innospec 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.| Innospec vs. Eshallgo Class A | Innospec vs. Amtech Systems | Innospec vs. Gold Fields Ltd | Innospec vs. Aegean Airlines SA |
| 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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