Correlation Between Natural Gas and Micro Silver
Can any of the company-specific risk be diversified away by investing in both Natural Gas and Micro Silver 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 Natural Gas and Micro Silver into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Natural Gas and Micro Silver Futures, you can compare the effects of market volatilities on Natural Gas and Micro Silver 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 Natural Gas with a short position of Micro Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Gas and Micro Silver.
Diversification Opportunities for Natural Gas and Micro Silver
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Natural and Micro is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Natural Gas and Micro Silver Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Silver Futures and Natural Gas 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 Natural Gas are associated (or correlated) with Micro Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Silver Futures has no effect on the direction of Natural Gas i.e., Natural Gas and Micro Silver go up and down completely randomly.
Pair Corralation between Natural Gas and Micro Silver
Assuming the 90 days horizon Natural Gas is expected to generate 2.76 times more return on investment than Micro Silver. However, Natural Gas is 2.76 times more volatile than Micro Silver Futures. It trades about 0.23 of its potential returns per unit of risk. Micro Silver Futures is currently generating about -0.14 per unit of risk. If you would invest 271.00 in Natural Gas on September 1, 2024 and sell it today you would earn a total of 65.00 from holding Natural Gas or generate 23.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Natural Gas vs. Micro Silver Futures
Performance |
| Timeline |
| Natural Gas |
| Micro Silver Futures |
Natural Gas and Micro Silver Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natural Gas and Micro Silver
The main advantage of trading using opposite Natural Gas and Micro Silver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Gas position performs unexpectedly, Micro Silver 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 Silver will offset losses from the drop in Micro Silver's long position.| Natural Gas vs. Wheat Futures | Natural Gas vs. Feeder Cattle Futures | Natural Gas vs. Micro Silver Futures | Natural Gas vs. 30 Day Fed |
| Micro Silver vs. Nasdaq 100 | Micro Silver vs. Oat Futures | Micro Silver vs. Wheat Futures | Micro Silver vs. Feeder 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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