Correlation Between Platinum and Soybean Futures
Can any of the company-specific risk be diversified away by investing in both Platinum and Soybean 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 Soybean Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Platinum and Soybean Futures, you can compare the effects of market volatilities on Platinum and Soybean 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 Soybean Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Platinum and Soybean Futures.
Diversification Opportunities for Platinum and Soybean Futures
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Platinum and Soybean is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Platinum and Soybean Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soybean 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 Soybean Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soybean Futures has no effect on the direction of Platinum i.e., Platinum and Soybean Futures go up and down completely randomly.
Pair Corralation between Platinum and Soybean Futures
Assuming the 90 days horizon Platinum is expected to generate 1.49 times more return on investment than Soybean Futures. However, Platinum is 1.49 times more volatile than Soybean Futures. It trades about 0.02 of its potential returns per unit of risk. Soybean Futures is currently generating about -0.07 per unit of risk. If you would invest 87,420 in Platinum on August 29, 2024 and sell it today you would earn a total of 6,010 from holding Platinum or generate 6.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.32% |
| Values | Daily Returns |
Platinum vs. Soybean Futures
Performance |
| Timeline |
| Platinum |
| Soybean Futures |
Platinum and Soybean Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Platinum and Soybean Futures
The main advantage of trading using opposite Platinum and Soybean Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Platinum position performs unexpectedly, Soybean 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 Soybean Futures will offset losses from the drop in Soybean Futures' long position.The idea behind Platinum and Soybean Futures pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Soybean Futures vs. Lean Hogs Futures | Soybean Futures vs. Orange Juice | Soybean Futures vs. 30 Day Fed | Soybean Futures vs. Live 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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