Correlation Between FutureFuel Corp and Ecovyst

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

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

Diversification Opportunities for FutureFuel Corp and Ecovyst

0.61

Correlation Coefficient

FutureFuel Corp  Ecovyst

Poor diversification

The 24 months correlation between FutureFuel and Ecovyst is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding FutureFuel Corp and Ecovyst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecovyst 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 Ecovyst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecovyst has no effect on the direction of FutureFuel Corp i.e., FutureFuel Corp and Ecovyst go up and down completely randomly.

Pair Corralation between FutureFuel Corp and Ecovyst

Allowing for the 90-day total investment horizon FutureFuel Corp is expected to under-perform the Ecovyst. In addition to that, FutureFuel Corp is 1.33 times more volatile than Ecovyst. It trades about -0.2 of its total potential returns per unit of risk. Ecovyst is currently generating about -0.13 per unit of volatility. If you would invest  1,031  in Ecovyst on March 13, 2024 and sell it today you would lose (103.00) from holding Ecovyst or give up 9.99% of portfolio value over 90 days.

Time Period	24 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

FutureFuel Corp  vs.  Ecovyst

FutureFuel Corp

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days FutureFuel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, FutureFuel Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Ecovyst

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Ecovyst has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ecovyst is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FutureFuel Corp and Ecovyst

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

The idea behind FutureFuel Corp and Ecovyst 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.