Correlation Between Platinum and Aluminum Futures
Can any of the company-specific risk be diversified away by investing in both Platinum and Aluminum Futures 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 Platinum and Aluminum Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Platinum and Aluminum Futures, you can compare the effects of market volatilities on Platinum and Aluminum Futures 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 Platinum with a short position of Aluminum Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Platinum and Aluminum Futures.
Diversification Opportunities for Platinum and Aluminum Futures
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Platinum and Aluminum is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Platinum and Aluminum Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminum Futures and Platinum 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 Platinum are associated (or correlated) with Aluminum Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminum Futures has no effect on the direction of Platinum i.e., Platinum and Aluminum Futures go up and down completely randomly.
Pair Corralation between Platinum and Aluminum Futures
Assuming the 90 days horizon Platinum is expected to under-perform the Aluminum Futures. But the commodity apears to be less risky and, when comparing its historical volatility, Platinum is 1.41 times less risky than Aluminum Futures. The commodity trades about -0.13 of its potential returns per unit of risk. The Aluminum Futures is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 256,050 in Aluminum Futures on September 1, 2024 and sell it today you would earn a total of 4,400 from holding Aluminum Futures or generate 1.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Platinum vs. Aluminum Futures
Performance |
| Timeline |
| Platinum |
| Aluminum Futures |
Platinum and Aluminum Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Platinum and Aluminum Futures
The main advantage of trading using opposite Platinum and Aluminum Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Platinum position performs unexpectedly, Aluminum Futures 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 Aluminum Futures will offset losses from the drop in Aluminum Futures' long position.| Platinum vs. Feeder Cattle Futures | Platinum vs. Micro Silver Futures | Platinum vs. 30 Day Fed | Platinum vs. Mini Dow Jones |
| Aluminum Futures vs. 30 Year Treasury | Aluminum Futures vs. Brent Crude Oil | Aluminum Futures vs. Five Year Treasury Note | Aluminum Futures vs. Soybean 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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