Correlation Between US Dollar and Wheat Futures
Can any of the company-specific risk be diversified away by investing in both US Dollar and Wheat Futures 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 US Dollar and Wheat Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Dollar and Wheat Futures, you can compare the effects of market volatilities on US Dollar and Wheat Futures 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 US Dollar with a short position of Wheat Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Dollar and Wheat Futures.
Diversification Opportunities for US Dollar and Wheat Futures
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between DXUSD and Wheat is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding US Dollar and Wheat Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheat Futures and US Dollar 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 US Dollar are associated (or correlated) with Wheat Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheat Futures has no effect on the direction of US Dollar i.e., US Dollar and Wheat Futures go up and down completely randomly.
Pair Corralation between US Dollar and Wheat Futures
Assuming the 90 days horizon US Dollar is expected to generate 0.21 times more return on investment than Wheat Futures. However, US Dollar is 4.69 times less risky than Wheat Futures. It trades about 0.01 of its potential returns per unit of risk. Wheat Futures is currently generating about -0.03 per unit of risk. If you would invest 10,505 in US Dollar on September 1, 2024 and sell it today you would earn a total of 75.00 from holding US Dollar or generate 0.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.13% |
| Values | Daily Returns |
US Dollar vs. Wheat Futures
Performance |
| Timeline |
| US Dollar |
| Wheat Futures |
US Dollar and Wheat Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Dollar and Wheat Futures
The main advantage of trading using opposite US Dollar and Wheat Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Dollar position performs unexpectedly, Wheat Futures 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 Wheat Futures will offset losses from the drop in Wheat Futures' long position.| US Dollar vs. Oat Futures | US Dollar vs. 30 Day Fed | US Dollar vs. Cotton | US Dollar vs. Micro Silver Futures |
| Wheat Futures vs. Coffee | Wheat Futures vs. Sugar | Wheat Futures vs. 10 Year T Note Futures | Wheat Futures vs. Nasdaq 100 |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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