Correlation Between Wheat Futures and Silver Futures
Can any of the company-specific risk be diversified away by investing in both Wheat Futures and Silver 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 Wheat Futures and Silver Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wheat Futures and Silver Futures, you can compare the effects of market volatilities on Wheat Futures and Silver 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 Wheat Futures with a short position of Silver Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wheat Futures and Silver Futures.
Diversification Opportunities for Wheat Futures and Silver Futures
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Wheat and Silver is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Wheat Futures and Silver Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Futures 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 Silver Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Futures has no effect on the direction of Wheat Futures i.e., Wheat Futures and Silver Futures go up and down completely randomly.
Pair Corralation between Wheat Futures and Silver Futures
Assuming the 90 days horizon Wheat Futures is expected to generate 0.81 times more return on investment than Silver Futures. However, Wheat Futures is 1.24 times less risky than Silver Futures. It trades about -0.03 of its potential returns per unit of risk. Silver Futures is currently generating about -0.27 per unit of risk. If you would invest 56,150 in Wheat Futures on August 29, 2024 and sell it today you would lose (600.00) from holding Wheat Futures or give up 1.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wheat Futures vs. Silver Futures
Performance |
| Timeline |
| Wheat Futures |
| Silver Futures |
Wheat Futures and Silver Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wheat Futures and Silver Futures
The main advantage of trading using opposite Wheat Futures and Silver Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wheat Futures position performs unexpectedly, Silver 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 Silver Futures will offset losses from the drop in Silver Futures' long position.| Wheat Futures vs. Nasdaq 100 | Wheat Futures vs. Oat Futures | Wheat Futures vs. Feeder Cattle Futures | Wheat Futures vs. Micro Silver Futures |
| Silver Futures vs. Sugar | Silver Futures vs. Nasdaq 100 | Silver Futures vs. Mini Dow Jones | Silver Futures vs. Five Year Treasury Note |
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 CEOs Directory module to screen CEOs from public companies around the world.
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