Correlation Between Micro Gold and Sugar
Can any of the company-specific risk be diversified away by investing in both Micro Gold and Sugar 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 Sugar 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 Sugar, you can compare the effects of market volatilities on Micro Gold and Sugar 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 Sugar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micro Gold and Sugar.
Diversification Opportunities for Micro Gold and Sugar
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Micro and Sugar is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Micro Gold Futures and Sugar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sugar 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 Sugar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sugar has no effect on the direction of Micro Gold i.e., Micro Gold and Sugar go up and down completely randomly.
Pair Corralation between Micro Gold and Sugar
Assuming the 90 days trading horizon Micro Gold is expected to generate 1.01 times less return on investment than Sugar. But when comparing it to its historical volatility, Micro Gold Futures is 1.66 times less risky than Sugar. It trades about 0.08 of its potential returns per unit of risk. Sugar is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,913 in Sugar on September 3, 2024 and sell it today you would earn a total of 195.00 from holding Sugar or generate 10.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Micro Gold Futures vs. Sugar
Performance |
| Timeline |
| Micro Gold Futures |
| Sugar |
Micro Gold and Sugar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micro Gold and Sugar
The main advantage of trading using opposite Micro Gold and Sugar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micro Gold position performs unexpectedly, Sugar 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 Sugar will offset losses from the drop in Sugar's long position.| Micro Gold vs. E Mini SP 500 | Micro Gold vs. 30 Year Treasury | Micro Gold vs. 2 Year T Note Futures | Micro Gold vs. Heating Oil |
| Sugar vs. Brent Crude Oil | Sugar vs. Natural Gas | Sugar vs. Five Year Treasury Note | Sugar vs. Micro Gold 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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