Correlation Between Wheat Futures and Copper
Can any of the company-specific risk be diversified away by investing in both Wheat Futures and Copper 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 Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wheat Futures and Copper, you can compare the effects of market volatilities on Wheat Futures and Copper 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 Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wheat Futures and Copper.
Diversification Opportunities for Wheat Futures and Copper
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wheat and Copper is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Wheat Futures and Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper 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 Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copper has no effect on the direction of Wheat Futures i.e., Wheat Futures and Copper go up and down completely randomly.
Pair Corralation between Wheat Futures and Copper
Assuming the 90 days horizon Wheat Futures is expected to generate 0.99 times more return on investment than Copper. However, Wheat Futures is 1.01 times less risky than Copper. It trades about -0.07 of its potential returns per unit of risk. Copper is currently generating about -0.13 per unit of risk. If you would invest 58,375 in Wheat Futures on August 29, 2024 and sell it today you would lose (2,825) from holding Wheat Futures or give up 4.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wheat Futures vs. Copper
Performance |
| Timeline |
| Wheat Futures |
| Copper |
Wheat Futures and Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wheat Futures and Copper
The main advantage of trading using opposite Wheat Futures and Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wheat Futures position performs unexpectedly, Copper 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 Copper will offset losses from the drop in Copper's long position.| Wheat Futures vs. Cotton | Wheat Futures vs. US Dollar | Wheat Futures vs. Palladium | Wheat Futures 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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