Correlation Between Palladium and Lean Hogs
Can any of the company-specific risk be diversified away by investing in both Palladium and Lean Hogs 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 Lean Hogs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palladium and Lean Hogs Futures, you can compare the effects of market volatilities on Palladium and Lean Hogs 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 Lean Hogs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palladium and Lean Hogs.
Diversification Opportunities for Palladium and Lean Hogs
Good diversification
The 3 months correlation between Palladium and Lean is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Palladium and Lean Hogs Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lean Hogs Futures 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 Lean Hogs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lean Hogs Futures has no effect on the direction of Palladium i.e., Palladium and Lean Hogs go up and down completely randomly.
Pair Corralation between Palladium and Lean Hogs
Assuming the 90 days horizon Palladium is expected to generate 2.29 times more return on investment than Lean Hogs. However, Palladium is 2.29 times more volatile than Lean Hogs Futures. It trades about 0.34 of its potential returns per unit of risk. Lean Hogs Futures is currently generating about 0.19 per unit of risk. If you would invest 91,210 in Palladium on November 3, 2024 and sell it today you would earn a total of 15,640 from holding Palladium or generate 17.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Palladium vs. Lean Hogs Futures
Performance |
| Timeline |
| Palladium |
| Lean Hogs Futures |
Palladium and Lean Hogs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Palladium and Lean Hogs
The main advantage of trading using opposite Palladium and Lean Hogs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palladium position performs unexpectedly, Lean Hogs 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 Lean Hogs will offset losses from the drop in Lean Hogs' long position.| Palladium vs. Feeder Cattle Futures | Palladium vs. Rough Rice Futures | Palladium vs. Coffee | Palladium vs. Soybean Futures |
| Lean Hogs vs. Live Cattle Futures | Lean Hogs vs. Lumber Futures | Lean Hogs vs. Natural Gas | Lean Hogs vs. Five Year Treasury Note |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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