Correlation Between Wheat Futures and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Wheat Futures and Dow Jones 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 Wheat Futures and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wheat Futures and Dow Jones Industrial, you can compare the effects of market volatilities on Wheat Futures and Dow Jones 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 Wheat Futures with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wheat Futures and Dow Jones.
Diversification Opportunities for Wheat Futures and Dow Jones
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Wheat and Dow is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Wheat Futures and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Wheat Futures 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 Wheat Futures are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Wheat Futures i.e., Wheat Futures and Dow Jones go up and down completely randomly.
Pair Corralation between Wheat Futures and Dow Jones
Assuming the 90 days horizon Wheat Futures is expected to under-perform the Dow Jones. In addition to that, Wheat Futures is 1.55 times more volatile than Dow Jones Industrial. It trades about -0.1 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.21 per unit of volatility. If you would invest 4,237,436 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 192,215 from holding Dow Jones Industrial or generate 4.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Wheat Futures vs. Dow Jones Industrial
Performance |
| Timeline |
Wheat Futures and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Wheat Futures
Pair trading matchups for Wheat Futures
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Wheat Futures and Dow Jones
The main advantage of trading using opposite Wheat Futures and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wheat Futures position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Wheat Futures vs. Heating Oil | Wheat Futures vs. Crude Oil | Wheat Futures vs. Aluminum Futures | Wheat Futures vs. Corn Futures |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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