Correlation Between FutureFuel Corp and Danimer Scientific

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

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

Diversification Opportunities for FutureFuel Corp and Danimer Scientific

-0.09

Correlation Coefficient

FutureFuel Corp  Danimer Scientific

Good diversification

The 3 months correlation between FutureFuel and Danimer is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding FutureFuel Corp and Danimer Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danimer Scientific 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 Danimer Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danimer Scientific has no effect on the direction of FutureFuel Corp i.e., FutureFuel Corp and Danimer Scientific go up and down completely randomly.

Pair Corralation between FutureFuel Corp and Danimer Scientific

Allowing for the 90-day total investment horizon FutureFuel Corp is expected to generate 0.49 times more return on investment than Danimer Scientific. However, FutureFuel Corp is 2.05 times less risky than Danimer Scientific. It trades about 0.01 of its potential returns per unit of risk. Danimer Scientific is currently generating about -0.02 per unit of risk. If you would invest  650.00  in FutureFuel Corp on January 26, 2024 and sell it today you would lose (90.00) from holding FutureFuel Corp or give up 13.85% of portfolio value over 90 days.

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

FutureFuel Corp  vs.  Danimer Scientific

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.

Danimer Scientific

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Danimer Scientific are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, Danimer Scientific reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FutureFuel Corp and Danimer Scientific

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

The idea behind FutureFuel Corp and Danimer Scientific 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.