Correlation Between Lean Hogs and Orange Juice
Can any of the company-specific risk be diversified away by investing in both Lean Hogs and Orange Juice 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 Lean Hogs and Orange Juice into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lean Hogs Futures and Orange Juice, you can compare the effects of market volatilities on Lean Hogs and Orange Juice 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 Lean Hogs with a short position of Orange Juice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lean Hogs and Orange Juice.
Diversification Opportunities for Lean Hogs and Orange Juice
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lean and Orange is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Lean Hogs Futures and Orange Juice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange Juice and Lean Hogs 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 Lean Hogs Futures are associated (or correlated) with Orange Juice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange Juice has no effect on the direction of Lean Hogs i.e., Lean Hogs and Orange Juice go up and down completely randomly.
Pair Corralation between Lean Hogs and Orange Juice
Assuming the 90 days horizon Lean Hogs is expected to generate 1.19 times less return on investment than Orange Juice. But when comparing it to its historical volatility, Lean Hogs Futures is 1.43 times less risky than Orange Juice. It trades about 0.13 of its potential returns per unit of risk. Orange Juice is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 48,405 in Orange Juice on August 25, 2024 and sell it today you would earn a total of 2,145 from holding Orange Juice or generate 4.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lean Hogs Futures vs. Orange Juice
Performance |
| Timeline |
| Lean Hogs Futures |
| Orange Juice |
Lean Hogs and Orange Juice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lean Hogs and Orange Juice
The main advantage of trading using opposite Lean Hogs and Orange Juice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lean Hogs position performs unexpectedly, Orange Juice 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 Orange Juice will offset losses from the drop in Orange Juice's long position.| Lean Hogs vs. Oat Futures | Lean Hogs vs. Wheat Futures | Lean Hogs vs. Feeder Cattle Futures | Lean Hogs vs. Micro Silver Futures |
| Orange Juice vs. Brent Crude Oil | Orange Juice vs. Natural Gas | Orange Juice vs. Five Year Treasury Note | Orange Juice vs. Micro Gold 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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