Correlation Between Teucrium Soybean and Teucrium Wheat
Can any of the company-specific risk be diversified away by investing in both Teucrium Soybean and Teucrium Wheat 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 Wheat 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 Wheat, you can compare the effects of market volatilities on Teucrium Soybean and Teucrium Wheat 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 Wheat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teucrium Soybean and Teucrium Wheat.
Diversification Opportunities for Teucrium Soybean and Teucrium Wheat
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Teucrium and Teucrium is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Teucrium Soybean and Teucrium Wheat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teucrium Wheat 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 Wheat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teucrium Wheat has no effect on the direction of Teucrium Soybean i.e., Teucrium Soybean and Teucrium Wheat go up and down completely randomly.
Pair Corralation between Teucrium Soybean and Teucrium Wheat
Given the investment horizon of 90 days Teucrium Soybean is expected to generate 0.83 times more return on investment than Teucrium Wheat. However, Teucrium Soybean is 1.2 times less risky than Teucrium Wheat. It trades about 0.02 of its potential returns per unit of risk. Teucrium Wheat is currently generating about -0.31 per unit of risk. If you would invest 2,118 in Teucrium Soybean on August 30, 2024 and sell it today you would earn a total of 6.00 from holding Teucrium Soybean or generate 0.28% 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 Wheat
Performance |
| Timeline |
| Teucrium Soybean |
| Teucrium Wheat |
Teucrium Soybean and Teucrium Wheat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teucrium Soybean and Teucrium Wheat
The main advantage of trading using opposite Teucrium Soybean and Teucrium Wheat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teucrium Soybean position performs unexpectedly, Teucrium Wheat 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 Wheat will offset losses from the drop in Teucrium Wheat's long position.| Teucrium Soybean vs. Teucrium Corn | Teucrium Soybean vs. Teucrium Wheat | Teucrium Soybean vs. Teucrium Sugar |
| Teucrium Wheat vs. Teucrium Corn | Teucrium Wheat vs. Teucrium Soybean | Teucrium Wheat vs. Teucrium Sugar | Teucrium Wheat vs. Invesco DB Agriculture |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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