Correlation Between Avantor and FutureFuel Corp

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

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

Diversification Opportunities for Avantor and FutureFuel Corp

0.93

Correlation Coefficient

Avantor  FutureFuel Corp

Almost no diversification

The 3 months correlation between Avantor and FutureFuel is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Avantor and FutureFuel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FutureFuel Corp and Avantor 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 Avantor 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 Avantor i.e., Avantor and FutureFuel Corp go up and down completely randomly.

Pair Corralation between Avantor and FutureFuel Corp

Given the investment horizon of 90 days Avantor is expected to under-perform the FutureFuel Corp. In addition to that, Avantor is 1.23 times more volatile than FutureFuel Corp. It trades about -0.14 of its total potential returns per unit of risk. FutureFuel Corp is currently generating about -0.16 per unit of volatility. If you would invest  524.00  in FutureFuel Corp on December 29, 2024 and sell it today you would lose (108.00) from holding FutureFuel Corp or give up 20.61% of portfolio value over 90 days.

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

Avantor  vs.  FutureFuel Corp

Avantor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avantor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

FutureFuel Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FutureFuel Corp 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 technical and fundamental 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 Avantor and FutureFuel Corp

The main advantage of trading using opposite Avantor and FutureFuel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantor 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 Avantor 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.