Correlation Between Micro Gold and Orange Juice
Can any of the company-specific risk be diversified away by investing in both Micro Gold and Orange Juice 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 Orange Juice 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 Orange Juice, you can compare the effects of market volatilities on Micro Gold and Orange Juice 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 Orange Juice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micro Gold and Orange Juice.
Diversification Opportunities for Micro Gold and Orange Juice
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Micro and Orange is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Micro Gold Futures and Orange Juice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange Juice 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 Orange Juice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange Juice has no effect on the direction of Micro Gold i.e., Micro Gold and Orange Juice go up and down completely randomly.
Pair Corralation between Micro Gold and Orange Juice
Assuming the 90 days trading horizon Micro Gold is expected to generate 1.44 times less return on investment than Orange Juice. But when comparing it to its historical volatility, Micro Gold Futures is 2.34 times less risky than Orange Juice. It trades about 0.15 of its potential returns per unit of risk. Orange Juice is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 35,585 in Orange Juice on August 27, 2024 and sell it today you would earn a total of 14,965 from holding Orange Juice or generate 42.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.92% |
| Values | Daily Returns |
Micro Gold Futures vs. Orange Juice
Performance |
| Timeline |
| Micro Gold Futures |
| Orange Juice |
Micro Gold and Orange Juice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micro Gold and Orange Juice
The main advantage of trading using opposite Micro Gold and Orange Juice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micro Gold position performs unexpectedly, Orange Juice 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 Orange Juice will offset losses from the drop in Orange Juice's long position.| Micro Gold vs. Platinum | Micro Gold vs. Soybean Futures | Micro Gold vs. E Mini SP 500 | Micro Gold vs. 30 Year Treasury |
| Orange Juice vs. Wheat Futures | Orange Juice vs. Feeder Cattle Futures | Orange Juice vs. Micro Silver Futures | Orange Juice vs. 30 Day Fed |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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