Correlation Between Sugar and Micro Gold
Can any of the company-specific risk be diversified away by investing in both Sugar and Micro Gold 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 Micro Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sugar and Micro Gold Futures, you can compare the effects of market volatilities on Sugar and Micro Gold 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 Micro Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sugar and Micro Gold.
Diversification Opportunities for Sugar and Micro Gold
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sugar and Micro is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Sugar and Micro Gold Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro 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 Micro Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Gold Futures has no effect on the direction of Sugar i.e., Sugar and Micro Gold go up and down completely randomly.
Pair Corralation between Sugar and Micro Gold
Assuming the 90 days horizon Sugar is expected to generate 1.12 times more return on investment than Micro Gold. However, Sugar is 1.12 times more volatile than Micro Gold Futures. It trades about 0.45 of its potential returns per unit of risk. Micro Gold Futures is currently generating about 0.4 per unit of risk. If you would invest 1,917 in Sugar on November 27, 2024 and sell it today you would earn a total of 192.00 from holding Sugar or generate 10.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sugar vs. Micro Gold Futures
Performance |
| Timeline |
| Sugar |
| Micro Gold Futures |
Sugar and Micro Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sugar and Micro Gold
The main advantage of trading using opposite Sugar and Micro Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sugar position performs unexpectedly, Micro Gold 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 Micro Gold will offset losses from the drop in Micro Gold's long position.| Sugar vs. Micro Gold Futures | Sugar vs. Live Cattle Futures | Sugar vs. Palladium | Sugar vs. Class III Milk |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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