Correlation Between Sugar and Mini Dow
Can any of the company-specific risk be diversified away by investing in both Sugar and Mini Dow 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 Mini Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sugar and Mini Dow Jones, you can compare the effects of market volatilities on Sugar and Mini Dow 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 Mini Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sugar and Mini Dow.
Diversification Opportunities for Sugar and Mini Dow
Very weak diversification
The 3 months correlation between Sugar and Mini is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sugar and Mini Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mini Dow Jones 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 Mini Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mini Dow Jones has no effect on the direction of Sugar i.e., Sugar and Mini Dow go up and down completely randomly.
Pair Corralation between Sugar and Mini Dow
Assuming the 90 days horizon Sugar is expected to generate 2.34 times more return on investment than Mini Dow. However, Sugar is 2.34 times more volatile than Mini Dow Jones. It trades about 0.08 of its potential returns per unit of risk. Mini Dow Jones is currently generating about 0.15 per unit of risk. If you would invest 1,830 in Sugar on August 29, 2024 and sell it today you would earn a total of 333.00 from holding Sugar or generate 18.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Sugar vs. Mini Dow Jones
Performance |
| Timeline |
| Sugar |
| Mini Dow Jones |
Sugar and Mini Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sugar and Mini Dow
The main advantage of trading using opposite Sugar and Mini Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sugar position performs unexpectedly, Mini Dow 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 Mini Dow will offset losses from the drop in Mini Dow's long position.The idea behind Sugar and Mini Dow Jones 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.| Mini Dow vs. Live Cattle Futures | Mini Dow vs. US Dollar | Mini Dow vs. Micro E mini Russell | Mini Dow vs. Lumber 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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