Correlation Between FutureFuel Corp and Flexible Solutions

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

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

Diversification Opportunities for FutureFuel Corp and Flexible Solutions

0.66

Correlation Coefficient

FutureFuel Corp  Flexible Solutions

Poor diversification

The 3 months correlation between FutureFuel and Flexible is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding FutureFuel Corp and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions 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 Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of FutureFuel Corp i.e., FutureFuel Corp and Flexible Solutions go up and down completely randomly.

Pair Corralation between FutureFuel Corp and Flexible Solutions

Allowing for the 90-day total investment horizon FutureFuel Corp is expected to generate 0.87 times more return on investment than Flexible Solutions. However, FutureFuel Corp is 1.15 times less risky than Flexible Solutions. It trades about 0.04 of its potential returns per unit of risk. Flexible Solutions International is currently generating about 0.03 per unit of risk. If you would invest  442.00  in FutureFuel Corp on July 20, 2024 and sell it today you would earn a total of  169.00  from holding FutureFuel Corp or generate 38.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

FutureFuel Corp  vs.  Flexible Solutions Internation

FutureFuel Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FutureFuel Corp are ranked lower than 5 (%) 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.

Flexible Solutions

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Flexible Solutions demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FutureFuel Corp and Flexible Solutions

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

The idea behind FutureFuel Corp and Flexible Solutions International 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.