Correlation Between FutureFuel Corp and Chemours

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

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

Diversification Opportunities for FutureFuel Corp and Chemours

-0.13

Correlation Coefficient

FutureFuel Corp  Chemours

Good diversification

The 3 months correlation between FutureFuel and Chemours is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding FutureFuel Corp and Chemours Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemours 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 Chemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemours has no effect on the direction of FutureFuel Corp i.e., FutureFuel Corp and Chemours go up and down completely randomly.

Pair Corralation between FutureFuel Corp and Chemours

Allowing for the 90-day total investment horizon FutureFuel Corp is expected to under-perform the Chemours. But the stock apears to be less risky and, when comparing its historical volatility, FutureFuel Corp is 1.99 times less risky than Chemours. The stock trades about -0.01 of its potential returns per unit of risk. The Chemours Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,626  in Chemours Co on January 28, 2024 and sell it today you would earn a total of  106.00  from holding Chemours Co or generate 4.04% return on investment over 90 days.

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

FutureFuel Corp  vs.  Chemours Co

FutureFuel Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FutureFuel Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, FutureFuel Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Chemours

Risk-Adjusted Performance

0 of 100

Very 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.

Pair Trading with FutureFuel Corp and Chemours

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

The idea behind FutureFuel Corp and Chemours Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.