Correlation Between E Mini and Rough Rice
Can any of the company-specific risk be diversified away by investing in both E Mini 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 E Mini and Rough Rice 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 Rough Rice Futures, you can compare the effects of market volatilities on E Mini 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 E Mini with a short position of Rough Rice. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Mini and Rough Rice.
Diversification Opportunities for E Mini and Rough Rice
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ESUSD and Rough is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding E Mini SP 500 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 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 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 E Mini i.e., E Mini and Rough Rice go up and down completely randomly.
Pair Corralation between E Mini and Rough Rice
Assuming the 90 days horizon E Mini SP 500 is expected to generate 0.36 times more return on investment than Rough Rice. However, E Mini SP 500 is 2.79 times less risky than Rough Rice. It trades about 0.1 of its potential returns per unit of risk. Rough Rice Futures is currently generating about 0.0 per unit of risk. If you would invest 396,575 in E Mini SP 500 on August 29, 2024 and sell it today you would earn a total of 204,925 from holding E Mini SP 500 or generate 51.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.61% |
| Values | Daily Returns |
E Mini SP 500 vs. Rough Rice Futures
Performance |
| Timeline |
| E Mini SP |
| Rough Rice Futures |
E Mini and Rough Rice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E Mini and Rough Rice
The main advantage of trading using opposite E Mini and Rough Rice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Mini 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.The idea behind E Mini SP 500 and Rough Rice Futures pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Rough Rice vs. Copper | Rough Rice vs. Gold Futures | Rough Rice vs. Soybean Meal Futures | Rough Rice vs. Coffee |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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