Correlation Between Element Solutions and FutureFuel Corp

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

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

Diversification Opportunities for Element Solutions and FutureFuel Corp

0.04

Correlation Coefficient

Element Solutions  FutureFuel Corp

Significant diversification

The 3 months correlation between Element and FutureFuel is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions and FutureFuel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FutureFuel Corp and Element Solutions 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 Element Solutions 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 Element Solutions i.e., Element Solutions and FutureFuel Corp go up and down completely randomly.

Pair Corralation between Element Solutions and FutureFuel Corp

Considering the 90-day investment horizon Element Solutions is expected to generate 0.75 times more return on investment than FutureFuel Corp. However, Element Solutions is 1.34 times less risky than FutureFuel Corp. It trades about -0.06 of its potential returns per unit of risk. FutureFuel Corp is currently generating about -0.16 per unit of risk. If you would invest  2,543  in Element Solutions on December 29, 2024 and sell it today you would lose (183.00) from holding Element Solutions or give up 7.2% of portfolio value over 90 days.

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

Element Solutions  vs.  FutureFuel Corp

Element Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Element Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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 Element Solutions and FutureFuel Corp

The main advantage of trading using opposite Element Solutions and FutureFuel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Element Solutions 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 Element Solutions 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.