Correlation Between E Mini and Copper
Can any of the company-specific risk be diversified away by investing in both E Mini and Copper 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 E Mini and Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E Mini SP 500 and Copper, you can compare the effects of market volatilities on E Mini and Copper 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 E Mini with a short position of Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Mini and Copper.
Diversification Opportunities for E Mini and Copper
Very good diversification
The 3 months correlation between ESUSD and Copper is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding E Mini SP 500 and Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper and E Mini 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 E Mini SP 500 are associated (or correlated) with Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copper has no effect on the direction of E Mini i.e., E Mini and Copper go up and down completely randomly.
Pair Corralation between E Mini and Copper
Assuming the 90 days horizon E Mini is expected to generate 2.2 times less return on investment than Copper. But when comparing it to its historical volatility, E Mini SP 500 is 1.29 times less risky than Copper. It trades about 0.14 of its potential returns per unit of risk. Copper is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 403.00 in Copper on November 3, 2024 and sell it today you would earn a total of 23.00 from holding Copper or generate 5.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
E Mini SP 500 vs. Copper
Performance |
| Timeline |
| E Mini SP |
| Copper |
E Mini and Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E Mini and Copper
The main advantage of trading using opposite E Mini and Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Mini position performs unexpectedly, Copper 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 Copper will offset losses from the drop in Copper's long position.| E Mini vs. Micro E mini Russell | E Mini vs. Cocoa | E Mini vs. Five Year Treasury Note | E Mini vs. Class III Milk |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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