Correlation Between Live Cattle and Micro Gold
Can any of the company-specific risk be diversified away by investing in both Live Cattle and Micro Gold 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 Live Cattle and Micro Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Live Cattle Futures and Micro Gold Futures, you can compare the effects of market volatilities on Live Cattle and Micro Gold 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 Live Cattle with a short position of Micro Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Cattle and Micro Gold.
Diversification Opportunities for Live Cattle and Micro Gold
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Live and Micro is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Live Cattle Futures and Micro Gold Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Gold Futures and Live Cattle 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 Live Cattle Futures are associated (or correlated) with Micro Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Gold Futures has no effect on the direction of Live Cattle i.e., Live Cattle and Micro Gold go up and down completely randomly.
Pair Corralation between Live Cattle and Micro Gold
Assuming the 90 days horizon Live Cattle Futures is expected to generate 0.54 times more return on investment than Micro Gold. However, Live Cattle Futures is 1.86 times less risky than Micro Gold. It trades about -0.01 of its potential returns per unit of risk. Micro Gold Futures is currently generating about -0.08 per unit of risk. If you would invest 18,788 in Live Cattle Futures on August 24, 2024 and sell it today you would lose (45.00) from holding Live Cattle Futures or give up 0.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Live Cattle Futures vs. Micro Gold Futures
Performance |
| Timeline |
| Live Cattle Futures |
| Micro Gold Futures |
Live Cattle and Micro Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Live Cattle and Micro Gold
The main advantage of trading using opposite Live Cattle and Micro Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Cattle position performs unexpectedly, Micro Gold 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 Micro Gold will offset losses from the drop in Micro Gold's long position.| Live Cattle vs. 2 Year T Note Futures | Live Cattle vs. Heating Oil | Live Cattle vs. Crude Oil | Live Cattle vs. Aluminum Futures |
| Micro Gold vs. Corn Futures | Micro Gold vs. Micro E mini Russell | Micro Gold vs. Orange Juice | Micro Gold vs. Live Cattle 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 CEOs Directory module to screen CEOs from public companies around the world.
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