Correlation Between Micro Gold and Lumber Futures
Can any of the company-specific risk be diversified away by investing in both Micro Gold and Lumber 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 Micro Gold and Lumber Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micro Gold Futures and Lumber Futures, you can compare the effects of market volatilities on Micro Gold and Lumber 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 Micro Gold with a short position of Lumber Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micro Gold and Lumber Futures.
Diversification Opportunities for Micro Gold and Lumber Futures
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Micro and Lumber is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Micro Gold Futures and Lumber Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumber Futures and Micro Gold 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 Micro Gold Futures are associated (or correlated) with Lumber Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumber Futures has no effect on the direction of Micro Gold i.e., Micro Gold and Lumber Futures go up and down completely randomly.
Pair Corralation between Micro Gold and Lumber Futures
Assuming the 90 days trading horizon Micro Gold Futures is expected to generate 0.54 times more return on investment than Lumber Futures. However, Micro Gold Futures is 1.85 times less risky than Lumber Futures. It trades about 0.11 of its potential returns per unit of risk. Lumber Futures is currently generating about 0.04 per unit of risk. If you would invest 204,220 in Micro Gold Futures on August 29, 2024 and sell it today you would earn a total of 59,080 from holding Micro Gold Futures or generate 28.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.04% |
| Values | Daily Returns |
Micro Gold Futures vs. Lumber Futures
Performance |
| Timeline |
| Micro Gold Futures |
| Lumber Futures |
Micro Gold and Lumber Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micro Gold and Lumber Futures
The main advantage of trading using opposite Micro Gold and Lumber Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micro Gold position performs unexpectedly, Lumber 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 Lumber Futures will offset losses from the drop in Lumber Futures' long position.| Micro Gold vs. Gold Futures | Micro Gold vs. Soybean Meal Futures | Micro Gold vs. Coffee | Micro Gold vs. Sugar |
| Lumber Futures vs. Palladium | Lumber Futures vs. Heating Oil | Lumber Futures vs. Micro Gold Futures | Lumber Futures vs. Lean Hogs 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |