Correlation Between Chemours and Gevo

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

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

Diversification Opportunities for Chemours and Gevo

-0.35

Correlation Coefficient

Chemours  Gevo

Very good diversification

The 3 months correlation between Chemours and Gevo is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Chemours Co and Gevo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gevo Inc and Chemours 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 Chemours Co are associated (or correlated) with Gevo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gevo Inc has no effect on the direction of Chemours i.e., Chemours and Gevo go up and down completely randomly.

Pair Corralation between Chemours and Gevo

Allowing for the 90-day total investment horizon Chemours Co is expected to under-perform the Gevo. But the stock apears to be less risky and, when comparing its historical volatility, Chemours Co is 1.68 times less risky than Gevo. The stock trades about -0.05 of its potential returns per unit of risk. The Gevo Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  144.00  in Gevo Inc on September 19, 2024 and sell it today you would earn a total of  13.00  from holding Gevo Inc or generate 9.03% return on investment over 90 days.

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

Chemours Co  vs.  Gevo Inc

Chemours

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Chemours Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Chemours is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Gevo Inc

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gevo Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Gevo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chemours and Gevo

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

The idea behind Chemours Co and Gevo Inc 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.