Correlation Between Copper and Corn Futures
Can any of the company-specific risk be diversified away by investing in both Copper and Corn Futures 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 Copper and Corn Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Copper and Corn Futures, you can compare the effects of market volatilities on Copper and Corn Futures 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 Copper with a short position of Corn Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Copper and Corn Futures.
Diversification Opportunities for Copper and Corn Futures
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Copper and Corn is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Copper and Corn Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corn Futures and Copper 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 Copper are associated (or correlated) with Corn Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corn Futures has no effect on the direction of Copper i.e., Copper and Corn Futures go up and down completely randomly.
Pair Corralation between Copper and Corn Futures
Assuming the 90 days horizon Copper is expected to under-perform the Corn Futures. But the commodity apears to be less risky and, when comparing its historical volatility, Copper is 1.04 times less risky than Corn Futures. The commodity trades about -0.06 of its potential returns per unit of risk. The Corn Futures is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 44,350 in Corn Futures on September 1, 2024 and sell it today you would lose (1,050) from holding Corn Futures or give up 2.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.47% |
| Values | Daily Returns |
Copper vs. Corn Futures
Performance |
| Timeline |
| Copper |
| Corn Futures |
Copper and Corn Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Copper and Corn Futures
The main advantage of trading using opposite Copper and Corn Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copper position performs unexpectedly, Corn Futures 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 Corn Futures will offset losses from the drop in Corn Futures' long position.The idea behind Copper and Corn 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.| Corn Futures vs. Palladium | Corn Futures vs. Cocoa | Corn Futures vs. Lean Hogs Futures | Corn Futures vs. Natural Gas |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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