Correlation Between Micro Silver and Cotton
Can any of the company-specific risk be diversified away by investing in both Micro Silver and Cotton 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 Micro Silver and Cotton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micro Silver Futures and Cotton, you can compare the effects of market volatilities on Micro Silver and Cotton 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 Micro Silver with a short position of Cotton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micro Silver and Cotton.
Diversification Opportunities for Micro Silver and Cotton
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Micro and Cotton is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Micro Silver Futures and Cotton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cotton and Micro Silver 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 Micro Silver Futures are associated (or correlated) with Cotton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cotton has no effect on the direction of Micro Silver i.e., Micro Silver and Cotton go up and down completely randomly.
Pair Corralation between Micro Silver and Cotton
Assuming the 90 days trading horizon Micro Silver Futures is expected to under-perform the Cotton. In addition to that, Micro Silver is 1.28 times more volatile than Cotton. It trades about -0.14 of its total potential returns per unit of risk. Cotton is currently generating about 0.12 per unit of volatility. If you would invest 6,957 in Cotton on September 1, 2024 and sell it today you would earn a total of 238.00 from holding Cotton or generate 3.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Micro Silver Futures vs. Cotton
Performance |
| Timeline |
| Micro Silver Futures |
| Cotton |
Micro Silver and Cotton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micro Silver and Cotton
The main advantage of trading using opposite Micro Silver and Cotton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micro Silver position performs unexpectedly, Cotton 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 Cotton will offset losses from the drop in Cotton's long position.| Micro Silver vs. Nasdaq 100 | Micro Silver vs. Oat Futures | Micro Silver vs. Wheat Futures | Micro Silver vs. Feeder 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| 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 | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |