Correlation Between Aluminum Futures and Micro E
Can any of the company-specific risk be diversified away by investing in both Aluminum Futures and Micro E 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 Aluminum Futures and Micro E into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum Futures and Micro E mini Russell, you can compare the effects of market volatilities on Aluminum Futures and Micro E 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 Aluminum Futures with a short position of Micro E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminum Futures and Micro E.
Diversification Opportunities for Aluminum Futures and Micro E
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Aluminum and Micro is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum Futures and Micro E mini Russell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro E mini and Aluminum Futures 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 Aluminum Futures are associated (or correlated) with Micro E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro E mini has no effect on the direction of Aluminum Futures i.e., Aluminum Futures and Micro E go up and down completely randomly.
Pair Corralation between Aluminum Futures and Micro E
Assuming the 90 days trading horizon Aluminum Futures is expected to generate 1.24 times more return on investment than Micro E. However, Aluminum Futures is 1.24 times more volatile than Micro E mini Russell. It trades about 0.14 of its potential returns per unit of risk. Micro E mini Russell is currently generating about 0.1 per unit of risk. If you would invest 249,825 in Aluminum Futures on November 3, 2024 and sell it today you would earn a total of 8,925 from holding Aluminum Futures or generate 3.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aluminum Futures vs. Micro E mini Russell
Performance |
| Timeline |
| Aluminum Futures |
| Micro E mini |
Aluminum Futures and Micro E Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminum Futures and Micro E
The main advantage of trading using opposite Aluminum Futures and Micro E positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminum Futures position performs unexpectedly, Micro E 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 Micro E will offset losses from the drop in Micro E's long position.| Aluminum Futures vs. Crude Oil | Aluminum Futures vs. E Mini SP 500 | Aluminum Futures vs. US Dollar | Aluminum Futures vs. Palladium |
| Micro E vs. Soybean Futures | Micro E vs. E Mini SP 500 | Micro E vs. 30 Year Treasury | Micro E vs. 2 Year T Note Futures |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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