Correlation Between Feeder Cattle and Nasdaq 100
Can any of the company-specific risk be diversified away by investing in both Feeder Cattle and Nasdaq 100 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 Nasdaq 100 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 Nasdaq 100, you can compare the effects of market volatilities on Feeder Cattle and Nasdaq 100 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 Nasdaq 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Feeder Cattle and Nasdaq 100.
Diversification Opportunities for Feeder Cattle and Nasdaq 100
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Feeder and Nasdaq is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Feeder Cattle Futures and Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 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 Nasdaq 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 has no effect on the direction of Feeder Cattle i.e., Feeder Cattle and Nasdaq 100 go up and down completely randomly.
Pair Corralation between Feeder Cattle and Nasdaq 100
Assuming the 90 days horizon Feeder Cattle is expected to generate 1.87 times less return on investment than Nasdaq 100. But when comparing it to its historical volatility, Feeder Cattle Futures is 1.21 times less risky than Nasdaq 100. It trades about 0.06 of its potential returns per unit of risk. Nasdaq 100 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,602,375 in Nasdaq 100 on August 25, 2024 and sell it today you would earn a total of 483,550 from holding Nasdaq 100 or generate 30.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.28% |
| Values | Daily Returns |
Feeder Cattle Futures vs. Nasdaq 100
Performance |
| Timeline |
| Feeder Cattle Futures |
| Nasdaq 100 |
Feeder Cattle and Nasdaq 100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Feeder Cattle and Nasdaq 100
The main advantage of trading using opposite Feeder Cattle and Nasdaq 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Feeder Cattle position performs unexpectedly, Nasdaq 100 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 Nasdaq 100 will offset losses from the drop in Nasdaq 100's long position.| Feeder Cattle vs. Heating Oil | Feeder Cattle vs. Crude Oil | Feeder Cattle vs. Aluminum Futures | Feeder Cattle vs. Corn Futures |
| Nasdaq 100 vs. Soybean Futures | Nasdaq 100 vs. Palladium | Nasdaq 100 vs. Brent Crude Oil | Nasdaq 100 vs. Lean Hogs 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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