Correlation Between AdvanSix and GrafTech International

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

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

Diversification Opportunities for AdvanSix and GrafTech International

0.5

Correlation Coefficient

AdvanSix  GrafTech International

Very weak diversification

The 3 months correlation between AdvanSix and GrafTech is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding AdvanSix and GrafTech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GrafTech International and AdvanSix 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 AdvanSix are associated (or correlated) with GrafTech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GrafTech International has no effect on the direction of AdvanSix i.e., AdvanSix and GrafTech International go up and down completely randomly.

Pair Corralation between AdvanSix and GrafTech International

Given the investment horizon of 90 days AdvanSix is expected to generate 0.44 times more return on investment than GrafTech International. However, AdvanSix is 2.28 times less risky than GrafTech International. It trades about -0.11 of its potential returns per unit of risk. GrafTech International is currently generating about -0.11 per unit of risk. If you would invest  2,768  in AdvanSix on December 21, 2024 and sell it today you would lose (437.00) from holding AdvanSix or give up 15.79% of portfolio value over 90 days.

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

AdvanSix  vs.  GrafTech International

AdvanSix

Risk-Adjusted Performance

Very Weak

Over the last 90 days AdvanSix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

GrafTech International

Risk-Adjusted Performance

Very Weak

Over the last 90 days GrafTech International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with AdvanSix and GrafTech International

The main advantage of trading using opposite AdvanSix and GrafTech International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AdvanSix position performs unexpectedly, GrafTech International 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 GrafTech International will offset losses from the drop in GrafTech International's long position.

The idea behind AdvanSix and GrafTech International 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.