Correlation Between Palladium and E Mini
Can any of the company-specific risk be diversified away by investing in both Palladium and E Mini 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 Palladium and E Mini into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palladium and E Mini SP 500, you can compare the effects of market volatilities on Palladium and E Mini 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 Palladium with a short position of E Mini. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palladium and E Mini.
Diversification Opportunities for Palladium and E Mini
Average diversification
The 3 months correlation between Palladium and ESUSD is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Palladium and E Mini SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Mini SP and Palladium 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 Palladium are associated (or correlated) with E Mini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Mini SP has no effect on the direction of Palladium i.e., Palladium and E Mini go up and down completely randomly.
Pair Corralation between Palladium and E Mini
Assuming the 90 days horizon Palladium is expected to generate 1.64 times less return on investment than E Mini. In addition to that, Palladium is 3.26 times more volatile than E Mini SP 500. It trades about 0.02 of its total potential returns per unit of risk. E Mini SP 500 is currently generating about 0.12 per unit of volatility. If you would invest 508,575 in E Mini SP 500 on September 1, 2024 and sell it today you would earn a total of 96,575 from holding E Mini SP 500 or generate 18.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.48% |
| Values | Daily Returns |
Palladium vs. E Mini SP 500
Performance |
| Timeline |
| Palladium |
| E Mini SP |
Palladium and E Mini Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Palladium and E Mini
The main advantage of trading using opposite Palladium and E Mini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palladium position performs unexpectedly, E Mini 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 E Mini will offset losses from the drop in E Mini's long position.| Palladium vs. Nasdaq 100 | Palladium vs. Oat Futures | Palladium vs. Wheat Futures | Palladium vs. Feeder Cattle Futures |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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