Correlation Between AdvanSix and First Graphene

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

By analyzing existing cross correlation between AdvanSix and First Graphene, you can compare the effects of market volatilities on AdvanSix and First Graphene 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 First Graphene. Check out your portfolio center. Please also check ongoing floating volatility patterns of AdvanSix and First Graphene.

Diversification Opportunities for AdvanSix and First Graphene

0.42

Correlation Coefficient

AdvanSix  First Graphene

Very weak diversification

The 3 months correlation between AdvanSix and First is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding AdvanSix and First Graphene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Graphene 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 First Graphene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Graphene has no effect on the direction of AdvanSix i.e., AdvanSix and First Graphene go up and down completely randomly.

Pair Corralation between AdvanSix and First Graphene

Given the investment horizon of 90 days AdvanSix is expected to under-perform the First Graphene. But the stock apears to be less risky and, when comparing its historical volatility, AdvanSix is 4.82 times less risky than First Graphene. The stock trades about -0.14 of its potential returns per unit of risk. The First Graphene is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2.20  in First Graphene on December 29, 2024 and sell it today you would earn a total of  1.30  from holding First Graphene or generate 59.09% return on investment over 90 days.

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

AdvanSix  vs.  First Graphene

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.

First Graphene

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Graphene are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, First Graphene reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AdvanSix and First Graphene

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

The idea behind AdvanSix and First Graphene 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.