Correlation Between Feeder Cattle and Copper
Can any of the company-specific risk be diversified away by investing in both Feeder Cattle 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 Feeder Cattle and Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Feeder Cattle Futures and Copper, you can compare the effects of market volatilities on Feeder Cattle 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 Feeder Cattle with a short position of Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Feeder Cattle and Copper.
Diversification Opportunities for Feeder Cattle and Copper
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Feeder and Copper is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Feeder Cattle Futures and Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper and Feeder Cattle 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 Feeder Cattle Futures 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 Feeder Cattle i.e., Feeder Cattle and Copper go up and down completely randomly.
Pair Corralation between Feeder Cattle and Copper
Assuming the 90 days horizon Feeder Cattle Futures is expected to generate 0.38 times more return on investment than Copper. However, Feeder Cattle Futures is 2.66 times less risky than Copper. It trades about 0.15 of its potential returns per unit of risk. Copper is currently generating about -0.13 per unit of risk. If you would invest 24,495 in Feeder Cattle Futures on August 25, 2024 and sell it today you would earn a total of 935.00 from holding Feeder Cattle Futures or generate 3.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Feeder Cattle Futures vs. Copper
Performance |
| Timeline |
| Feeder Cattle Futures |
| Copper |
Feeder Cattle and Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Feeder Cattle and Copper
The main advantage of trading using opposite Feeder Cattle and Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Feeder Cattle 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.| Feeder Cattle vs. Heating Oil | Feeder Cattle vs. Crude Oil | Feeder Cattle vs. Aluminum Futures | Feeder Cattle vs. Corn Futures |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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