Correlation Between Sugar and Gold Futures
Can any of the company-specific risk be diversified away by investing in both Sugar and Gold 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 Sugar and Gold Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sugar and Gold Futures, you can compare the effects of market volatilities on Sugar and Gold 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 Sugar with a short position of Gold Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sugar and Gold Futures.
Diversification Opportunities for Sugar and Gold Futures
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sugar and Gold is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sugar and Gold Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Futures and Sugar 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 Sugar are associated (or correlated) with Gold Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Futures has no effect on the direction of Sugar i.e., Sugar and Gold Futures go up and down completely randomly.
Pair Corralation between Sugar and Gold Futures
Assuming the 90 days horizon Sugar is expected to under-perform the Gold Futures. In addition to that, Sugar is 1.57 times more volatile than Gold Futures. It trades about -0.11 of its total potential returns per unit of risk. Gold Futures is currently generating about 0.03 per unit of volatility. If you would invest 267,700 in Gold Futures on August 25, 2024 and sell it today you would earn a total of 3,440 from holding Gold Futures or generate 1.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sugar vs. Gold Futures
Performance |
| Timeline |
| Sugar |
| Gold Futures |
Sugar and Gold Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sugar and Gold Futures
The main advantage of trading using opposite Sugar and Gold Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sugar position performs unexpectedly, Gold 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 Gold Futures will offset losses from the drop in Gold Futures' long position.The idea behind Sugar and Gold 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.| Gold Futures vs. Aluminum Futures | Gold Futures vs. Lean Hogs Futures | Gold Futures vs. Crude Oil | Gold Futures vs. Corn 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |