Correlation Between Corn Futures and Wheat Futures
Can any of the company-specific risk be diversified away by investing in both Corn Futures 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 Corn Futures and Wheat Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Corn Futures and Wheat Futures, you can compare the effects of market volatilities on Corn Futures 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 Corn Futures with a short position of Wheat Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corn Futures and Wheat Futures.
Diversification Opportunities for Corn Futures and Wheat Futures
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Corn and Wheat is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Corn Futures and Wheat Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheat Futures and Corn 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 Corn Futures 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 Corn Futures i.e., Corn Futures and Wheat Futures go up and down completely randomly.
Pair Corralation between Corn Futures and Wheat Futures
Assuming the 90 days horizon Corn Futures is expected to generate 0.66 times more return on investment than Wheat Futures. However, Corn Futures is 1.51 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 39,600 in Corn Futures on August 29, 2024 and sell it today you would earn a total of 2,400 from holding Corn Futures or generate 6.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Corn Futures vs. Wheat Futures
Performance |
| Timeline |
| Corn Futures |
| Wheat Futures |
Corn Futures and Wheat Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Corn Futures and Wheat Futures
The main advantage of trading using opposite Corn Futures and Wheat Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corn Futures 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.| Corn Futures vs. Nasdaq 100 | Corn Futures vs. Oat Futures | Corn Futures vs. Wheat Futures | Corn Futures vs. Micro Silver Futures |
| Wheat Futures vs. Cotton | Wheat Futures vs. US Dollar | Wheat Futures vs. Palladium | Wheat Futures vs. Lumber 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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