Correlation Between Mini Dow and Wheat Futures
Can any of the company-specific risk be diversified away by investing in both Mini Dow and Wheat Futures 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 Mini Dow and Wheat Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mini Dow Jones and Wheat Futures, you can compare the effects of market volatilities on Mini Dow and Wheat Futures 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 Mini Dow with a short position of Wheat Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mini Dow and Wheat Futures.
Diversification Opportunities for Mini Dow and Wheat Futures
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Mini and Wheat is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Mini Dow Jones and Wheat Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheat Futures and Mini Dow 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 Mini Dow Jones are associated (or correlated) with Wheat Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheat Futures has no effect on the direction of Mini Dow i.e., Mini Dow and Wheat Futures go up and down completely randomly.
Pair Corralation between Mini Dow and Wheat Futures
Assuming the 90 days horizon Mini Dow Jones is expected to generate 0.43 times more return on investment than Wheat Futures. However, Mini Dow Jones is 2.34 times less risky than Wheat Futures. It trades about 0.09 of its potential returns per unit of risk. Wheat Futures is currently generating about 0.0 per unit of risk. If you would invest 3,901,600 in Mini Dow Jones on August 25, 2024 and sell it today you would earn a total of 540,100 from holding Mini Dow Jones or generate 13.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.97% |
| Values | Daily Returns |
Mini Dow Jones vs. Wheat Futures
Performance |
| Timeline |
| Mini Dow Jones |
| Wheat Futures |
Mini Dow and Wheat Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mini Dow and Wheat Futures
The main advantage of trading using opposite Mini Dow and Wheat Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mini Dow position performs unexpectedly, Wheat Futures 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 Wheat Futures will offset losses from the drop in Wheat Futures' long position.The idea behind Mini Dow Jones and Wheat Futures pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Wheat Futures vs. Heating Oil | Wheat Futures vs. Crude Oil | Wheat Futures vs. Aluminum Futures | Wheat Futures vs. Corn 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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