Correlation Between Ashland Global and FutureFuel Corp

Can any of the company-specific risk be diversified away by investing in both Ashland Global 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 Ashland Global and FutureFuel Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ashland Global Holdings and FutureFuel Corp, you can compare the effects of market volatilities on Ashland Global 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 Ashland Global with a short position of FutureFuel Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ashland Global and FutureFuel Corp.

Diversification Opportunities for Ashland Global and FutureFuel Corp

0.74

Correlation Coefficient

Ashland Global  FutureFuel Corp

Poor diversification

The 3 months correlation between Ashland and FutureFuel is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ashland Global Holdings and FutureFuel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FutureFuel Corp and Ashland Global 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 Ashland Global Holdings 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 Ashland Global i.e., Ashland Global and FutureFuel Corp go up and down completely randomly.

Pair Corralation between Ashland Global and FutureFuel Corp

Considering the 90-day investment horizon Ashland Global Holdings is expected to under-perform the FutureFuel Corp. But the stock apears to be less risky and, when comparing its historical volatility, Ashland Global Holdings is 1.08 times less risky than FutureFuel Corp. The stock trades about -0.07 of its potential returns per unit of risk. The FutureFuel Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  519.00  in FutureFuel Corp on October 26, 2024 and sell it today you would earn a total of  33.00  from holding FutureFuel Corp or generate 6.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Ashland Global Holdings  vs.  FutureFuel Corp

Ashland Global Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ashland Global Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

FutureFuel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FutureFuel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ashland Global and FutureFuel Corp

The main advantage of trading using opposite Ashland Global and FutureFuel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ashland Global 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.

The idea behind Ashland Global Holdings and FutureFuel Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.