Correlation Between FutureFuel Corp and Ramaco Resources

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

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

Diversification Opportunities for FutureFuel Corp and Ramaco Resources

0.44

Correlation Coefficient

FutureFuel Corp  Ramaco Resources

Very weak diversification

The 3 months correlation between FutureFuel and Ramaco is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding FutureFuel Corp and Ramaco Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramaco Resources and FutureFuel Corp 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 FutureFuel Corp are associated (or correlated) with Ramaco Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramaco Resources has no effect on the direction of FutureFuel Corp i.e., FutureFuel Corp and Ramaco Resources go up and down completely randomly.

Pair Corralation between FutureFuel Corp and Ramaco Resources

Allowing for the 90-day total investment horizon FutureFuel Corp is expected to under-perform the Ramaco Resources. But the stock apears to be less risky and, when comparing its historical volatility, FutureFuel Corp is 3.13 times less risky than Ramaco Resources. The stock trades about -0.12 of its potential returns per unit of risk. The Ramaco Resources is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,000.00  in Ramaco Resources on December 29, 2024 and sell it today you would lose (184.00) from holding Ramaco Resources or give up 18.4% of portfolio value over 90 days.

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

FutureFuel Corp  vs.  Ramaco Resources

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.

Ramaco Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ramaco Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with FutureFuel Corp and Ramaco Resources

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

The idea behind FutureFuel Corp and Ramaco Resources 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.