Correlation Between Micro Silver and Lean Hogs
Can any of the company-specific risk be diversified away by investing in both Micro Silver and Lean Hogs 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 Lean Hogs 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 Lean Hogs Futures, you can compare the effects of market volatilities on Micro Silver and Lean Hogs 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 Lean Hogs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micro Silver and Lean Hogs.
Diversification Opportunities for Micro Silver and Lean Hogs
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Micro and Lean is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Micro Silver Futures and Lean Hogs Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lean Hogs Futures 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 Lean Hogs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lean Hogs Futures has no effect on the direction of Micro Silver i.e., Micro Silver and Lean Hogs go up and down completely randomly.
Pair Corralation between Micro Silver and Lean Hogs
Assuming the 90 days trading horizon Micro Silver Futures is expected to under-perform the Lean Hogs. In addition to that, Micro Silver is 1.35 times more volatile than Lean Hogs Futures. It trades about -0.26 of its total potential returns per unit of risk. Lean Hogs Futures is currently generating about 0.11 per unit of volatility. If you would invest 8,063 in Lean Hogs Futures on August 29, 2024 and sell it today you would earn a total of 247.00 from holding Lean Hogs Futures or generate 3.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Micro Silver Futures vs. Lean Hogs Futures
Performance |
| Timeline |
| Micro Silver Futures |
| Lean Hogs Futures |
Micro Silver and Lean Hogs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micro Silver and Lean Hogs
The main advantage of trading using opposite Micro Silver and Lean Hogs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micro Silver position performs unexpectedly, Lean Hogs 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 Lean Hogs will offset losses from the drop in Lean Hogs' long position.| Micro Silver vs. Micro E mini Russell | Micro Silver vs. Heating Oil | Micro Silver vs. Aluminum Futures | Micro Silver vs. Micro Gold Futures |
| Lean Hogs vs. 2 Year T Note Futures | Lean Hogs vs. Heating Oil | Lean Hogs vs. Crude Oil | Lean Hogs vs. Aluminum 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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