Correlation Between Micro Silver and Natural Gas
Can any of the company-specific risk be diversified away by investing in both Micro Silver and Natural Gas 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 Natural Gas 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 Natural Gas, you can compare the effects of market volatilities on Micro Silver and Natural Gas 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 Natural Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micro Silver and Natural Gas.
Diversification Opportunities for Micro Silver and Natural Gas
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Micro and Natural is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Micro Silver Futures and Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas 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 Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas has no effect on the direction of Micro Silver i.e., Micro Silver and Natural Gas go up and down completely randomly.
Pair Corralation between Micro Silver and Natural Gas
Assuming the 90 days trading horizon Micro Silver Futures is expected to under-perform the Natural Gas. But the commodity apears to be less risky and, when comparing its historical volatility, Micro Silver Futures is 2.76 times less risky than Natural Gas. The commodity trades about -0.14 of its potential returns per unit of risk. The Natural Gas is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 271.00 in Natural Gas on September 1, 2024 and sell it today you would earn a total of 65.00 from holding Natural Gas or generate 23.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Micro Silver Futures vs. Natural Gas
Performance |
| Timeline |
| Micro Silver Futures |
| Natural Gas |
Micro Silver and Natural Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micro Silver and Natural Gas
The main advantage of trading using opposite Micro Silver and Natural Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micro Silver position performs unexpectedly, Natural Gas 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 Natural Gas will offset losses from the drop in Natural Gas' long position.| Micro Silver vs. Nasdaq 100 | Micro Silver vs. Oat Futures | Micro Silver vs. Wheat Futures | Micro Silver vs. Feeder Cattle Futures |
| Natural Gas vs. Wheat Futures | Natural Gas vs. Feeder Cattle Futures | Natural Gas vs. Micro Silver Futures | Natural Gas vs. 30 Day Fed |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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