Correlation Between Silver Futures and Lean Hogs
Can any of the company-specific risk be diversified away by investing in both Silver Futures 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 Silver Futures and Lean Hogs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silver Futures and Lean Hogs Futures, you can compare the effects of market volatilities on Silver Futures 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 Silver Futures with a short position of Lean Hogs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silver Futures and Lean Hogs.
Diversification Opportunities for Silver Futures and Lean Hogs
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Silver and Lean is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding 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 Silver Futures 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 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 Silver Futures i.e., Silver Futures and Lean Hogs go up and down completely randomly.
Pair Corralation between Silver Futures and Lean Hogs
Assuming the 90 days horizon Silver Futures is expected to generate 0.75 times more return on investment than Lean Hogs. However, Silver Futures is 1.33 times less risky than Lean Hogs. It trades about 0.05 of its potential returns per unit of risk. Lean Hogs Futures is currently generating about 0.01 per unit of risk. If you would invest 2,242 in Silver Futures on August 25, 2024 and sell it today you would earn a total of 894.00 from holding Silver Futures or generate 39.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.45% |
| Values | Daily Returns |
Silver Futures vs. Lean Hogs Futures
Performance |
| Timeline |
| Silver Futures |
| Lean Hogs Futures |
Silver Futures and Lean Hogs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silver Futures and Lean Hogs
The main advantage of trading using opposite Silver Futures and Lean Hogs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silver Futures 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.| Silver Futures vs. Orange Juice | Silver Futures vs. Brent Crude Oil | Silver Futures vs. Natural Gas | Silver Futures vs. Five Year Treasury Note |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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