Correlation Between Teucrium Soybean and Teucrium Corn
Can any of the company-specific risk be diversified away by investing in both Teucrium Soybean and Teucrium Corn 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 Teucrium Soybean and Teucrium Corn into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teucrium Soybean and Teucrium Corn, you can compare the effects of market volatilities on Teucrium Soybean and Teucrium Corn 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 Teucrium Soybean with a short position of Teucrium Corn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teucrium Soybean and Teucrium Corn.
Diversification Opportunities for Teucrium Soybean and Teucrium Corn
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Teucrium and Teucrium is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Teucrium Soybean and Teucrium Corn in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teucrium Corn and Teucrium Soybean 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 Teucrium Soybean are associated (or correlated) with Teucrium Corn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teucrium Corn has no effect on the direction of Teucrium Soybean i.e., Teucrium Soybean and Teucrium Corn go up and down completely randomly.
Pair Corralation between Teucrium Soybean and Teucrium Corn
Given the investment horizon of 90 days Teucrium Soybean is expected to generate 1.44 times less return on investment than Teucrium Corn. In addition to that, Teucrium Soybean is 1.05 times more volatile than Teucrium Corn. It trades about 0.22 of its total potential returns per unit of risk. Teucrium Corn is currently generating about 0.33 per unit of volatility. If you would invest 1,852 in Teucrium Corn on November 4, 2024 and sell it today you would earn a total of 153.00 from holding Teucrium Corn or generate 8.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teucrium Soybean vs. Teucrium Corn
Performance |
| Timeline |
| Teucrium Soybean |
| Teucrium Corn |
Teucrium Soybean and Teucrium Corn Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teucrium Soybean and Teucrium Corn
The main advantage of trading using opposite Teucrium Soybean and Teucrium Corn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teucrium Soybean position performs unexpectedly, Teucrium Corn 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 Teucrium Corn will offset losses from the drop in Teucrium Corn's long position.| Teucrium Soybean vs. Teucrium Corn | Teucrium Soybean vs. Teucrium Wheat | Teucrium Soybean vs. Teucrium Sugar |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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