Correlation Between LyondellBasell Industries and FutureFuel Corp
Can any of the company-specific risk be diversified away by investing in both LyondellBasell Industries 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 LyondellBasell Industries and FutureFuel Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LyondellBasell Industries NV and FutureFuel Corp, you can compare the effects of market volatilities on LyondellBasell Industries 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 LyondellBasell Industries with a short position of FutureFuel Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of LyondellBasell Industries and FutureFuel Corp.
Diversification Opportunities for LyondellBasell Industries and FutureFuel Corp
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LyondellBasell and FutureFuel is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding LyondellBasell Industries NV and FutureFuel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FutureFuel Corp and LyondellBasell Industries 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 LyondellBasell Industries NV 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 LyondellBasell Industries i.e., LyondellBasell Industries and FutureFuel Corp go up and down completely randomly.
Pair Corralation between LyondellBasell Industries and FutureFuel Corp
Considering the 90-day investment horizon LyondellBasell Industries NV is expected to under-perform the FutureFuel Corp. But the stock apears to be less risky and, when comparing its historical volatility, LyondellBasell Industries NV is 2.48 times less risky than FutureFuel Corp. The stock trades about -0.01 of its potential returns per unit of risk. The FutureFuel Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 631.00 in FutureFuel Corp on September 12, 2024 and sell it today you would lose (111.00) from holding FutureFuel Corp or give up 17.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LyondellBasell Industries NV vs. FutureFuel Corp
Performance |
| Timeline |
| LyondellBasell Industries |
| FutureFuel Corp |
LyondellBasell Industries and FutureFuel Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LyondellBasell Industries and FutureFuel Corp
The main advantage of trading using opposite LyondellBasell Industries and FutureFuel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LyondellBasell Industries 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.| LyondellBasell Industries vs. International Flavors Fragrances | LyondellBasell Industries vs. Cabot | LyondellBasell Industries vs. Westlake Chemical | LyondellBasell Industries vs. Air Products and |
| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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