Correlation Between Orange Juice and Natural Gas
Can any of the company-specific risk be diversified away by investing in both Orange Juice and Natural Gas 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 Orange Juice and Natural Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orange Juice and Natural Gas, you can compare the effects of market volatilities on Orange Juice and Natural Gas 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 Orange Juice with a short position of Natural Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orange Juice and Natural Gas.
Diversification Opportunities for Orange Juice and Natural Gas
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Orange and Natural is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Orange Juice and Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas and Orange Juice 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 Orange Juice are associated (or correlated) with Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas has no effect on the direction of Orange Juice i.e., Orange Juice and Natural Gas go up and down completely randomly.
Pair Corralation between Orange Juice and Natural Gas
Assuming the 90 days horizon Orange Juice is expected to generate 0.55 times more return on investment than Natural Gas. However, Orange Juice is 1.81 times less risky than Natural Gas. It trades about 0.06 of its potential returns per unit of risk. Natural Gas is currently generating about 0.03 per unit of risk. If you would invest 25,255 in Orange Juice on November 1, 2024 and sell it today you would earn a total of 22,610 from holding Orange Juice or generate 89.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.02% |
| Values | Daily Returns |
Orange Juice vs. Natural Gas
Performance |
| Timeline |
| Orange Juice |
| Natural Gas |
Orange Juice and Natural Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orange Juice and Natural Gas
The main advantage of trading using opposite Orange Juice and Natural Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orange Juice position performs unexpectedly, Natural Gas 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 Natural Gas will offset losses from the drop in Natural Gas' long position.| Orange Juice vs. E Mini SP 500 | Orange Juice vs. 30 Year Treasury | Orange Juice vs. 2 Year T Note Futures | Orange Juice vs. Heating Oil |
| Natural Gas vs. Gold Futures | Natural Gas vs. Platinum | Natural Gas vs. US Dollar | Natural Gas vs. Orange Juice |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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