Correlation Between Aluminum Futures and Rough Rice
Can any of the company-specific risk be diversified away by investing in both Aluminum Futures and Rough Rice 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 Rough Rice into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum Futures and Rough Rice Futures, you can compare the effects of market volatilities on Aluminum Futures and Rough Rice 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 Rough Rice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminum Futures and Rough Rice.
Diversification Opportunities for Aluminum Futures and Rough Rice
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aluminum and Rough is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum Futures and Rough Rice Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rough Rice Futures 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 Rough Rice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rough Rice Futures has no effect on the direction of Aluminum Futures i.e., Aluminum Futures and Rough Rice go up and down completely randomly.
Pair Corralation between Aluminum Futures and Rough Rice
Assuming the 90 days trading horizon Aluminum Futures is expected to generate 0.69 times more return on investment than Rough Rice. However, Aluminum Futures is 1.46 times less risky than Rough Rice. It trades about 0.04 of its potential returns per unit of risk. Rough Rice Futures is currently generating about -0.02 per unit of risk. If you would invest 233,225 in Aluminum Futures on August 25, 2024 and sell it today you would earn a total of 26,800 from holding Aluminum Futures or generate 11.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.57% |
| Values | Daily Returns |
Aluminum Futures vs. Rough Rice Futures
Performance |
| Timeline |
| Aluminum Futures |
| Rough Rice Futures |
Aluminum Futures and Rough Rice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminum Futures and Rough Rice
The main advantage of trading using opposite Aluminum Futures and Rough Rice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminum Futures position performs unexpectedly, Rough Rice 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 Rough Rice will offset losses from the drop in Rough Rice's long position.| Aluminum Futures vs. Live Cattle Futures | Aluminum Futures vs. Lean Hogs Futures | Aluminum Futures vs. Micro Gold Futures | Aluminum Futures vs. US Dollar |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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