Correlation Between Lean Hogs and Palladium
Can any of the company-specific risk be diversified away by investing in both Lean Hogs and Palladium 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 Palladium 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 Palladium, you can compare the effects of market volatilities on Lean Hogs and Palladium 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 Palladium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lean Hogs and Palladium.
Diversification Opportunities for Lean Hogs and Palladium
Significant diversification
The 3 months correlation between Lean and Palladium is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Lean Hogs Futures and Palladium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palladium 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 Palladium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palladium has no effect on the direction of Lean Hogs i.e., Lean Hogs and Palladium go up and down completely randomly.
Pair Corralation between Lean Hogs and Palladium
Assuming the 90 days horizon Lean Hogs Futures is expected to generate 0.57 times more return on investment than Palladium. However, Lean Hogs Futures is 1.74 times less risky than Palladium. It trades about 0.02 of its potential returns per unit of risk. Palladium is currently generating about 0.0 per unit of risk. If you would invest 8,225 in Lean Hogs Futures on August 29, 2024 and sell it today you would earn a total of 85.00 from holding Lean Hogs Futures or generate 1.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lean Hogs Futures vs. Palladium
Performance |
| Timeline |
| Lean Hogs Futures |
| Palladium |
Lean Hogs and Palladium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lean Hogs and Palladium
The main advantage of trading using opposite Lean Hogs and Palladium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lean Hogs position performs unexpectedly, Palladium 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 Palladium will offset losses from the drop in Palladium's long position.| Lean Hogs vs. 2 Year T Note Futures | Lean Hogs vs. Heating Oil | Lean Hogs vs. Crude Oil | Lean Hogs vs. Aluminum Futures |
| Palladium vs. Cotton | Palladium vs. Lean Hogs Futures | Palladium vs. Micro E mini Russell | Palladium vs. Lumber 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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