Correlation Between FutureFuel Corp and Celanese

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

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

Diversification Opportunities for FutureFuel Corp and Celanese

0.85

Correlation Coefficient

FutureFuel Corp  Celanese

Very poor diversification

The 3 months correlation between FutureFuel and Celanese is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding FutureFuel Corp and Celanese in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celanese 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 Celanese. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celanese has no effect on the direction of FutureFuel Corp i.e., FutureFuel Corp and Celanese go up and down completely randomly.

Pair Corralation between FutureFuel Corp and Celanese

Allowing for the 90-day total investment horizon FutureFuel Corp is expected to generate 0.97 times more return on investment than Celanese. However, FutureFuel Corp is 1.03 times less risky than Celanese. It trades about 0.1 of its potential returns per unit of risk. Celanese is currently generating about -0.11 per unit of risk. If you would invest  547.00  in FutureFuel Corp on January 19, 2024 and sell it today you would earn a total of  20.40  from holding FutureFuel Corp or generate 3.73% return on investment over 90 days.

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

FutureFuel Corp  vs.  Celanese

FutureFuel Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FutureFuel Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, FutureFuel Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Celanese

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Celanese are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Celanese may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with FutureFuel Corp and Celanese

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

The idea behind FutureFuel Corp and Celanese 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.