Correlation Between E Mini and Micro Silver
Can any of the company-specific risk be diversified away by investing in both E Mini and Micro Silver 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 Micro Silver 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 Micro Silver Futures, you can compare the effects of market volatilities on E Mini and Micro Silver 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 Micro Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Mini and Micro Silver.
Diversification Opportunities for E Mini and Micro Silver
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ESUSD and Micro is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding E Mini SP 500 and Micro Silver Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Silver Futures 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 Micro Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Silver Futures has no effect on the direction of E Mini i.e., E Mini and Micro Silver go up and down completely randomly.
Pair Corralation between E Mini and Micro Silver
Assuming the 90 days horizon E Mini is expected to generate 1.01 times less return on investment than Micro Silver. But when comparing it to its historical volatility, E Mini SP 500 is 2.48 times less risky than Micro Silver. It trades about 0.17 of its potential returns per unit of risk. Micro Silver Futures is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,295 in Micro Silver Futures on August 26, 2024 and sell it today you would earn a total of 839.00 from holding Micro Silver Futures or generate 36.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
E Mini SP 500 vs. Micro Silver Futures
Performance |
| Timeline |
| E Mini SP |
| Micro Silver Futures |
E Mini and Micro Silver Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E Mini and Micro Silver
The main advantage of trading using opposite E Mini and Micro Silver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Mini position performs unexpectedly, Micro Silver 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 Silver will offset losses from the drop in Micro Silver's long position.| E Mini vs. Natural Gas | E Mini vs. Five Year Treasury Note | E Mini vs. Micro Gold Futures | E Mini vs. Class III Milk |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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