Correlation Between Corn Futures and Oat Futures
Can any of the company-specific risk be diversified away by investing in both Corn Futures and Oat 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 Oat 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 Oat Futures, you can compare the effects of market volatilities on Corn Futures and Oat 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 Oat Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corn Futures and Oat Futures.
Diversification Opportunities for Corn Futures and Oat Futures
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Corn and Oat is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Corn Futures and Oat Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oat 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 Oat Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oat Futures has no effect on the direction of Corn Futures i.e., Corn Futures and Oat Futures go up and down completely randomly.
Pair Corralation between Corn Futures and Oat Futures
Assuming the 90 days horizon Corn Futures is expected to generate 0.31 times more return on investment than Oat Futures. However, Corn Futures is 3.23 times less risky than Oat Futures. It trades about 0.06 of its potential returns per unit of risk. Oat Futures is currently generating about -0.08 per unit of risk. If you would invest 41,075 in Corn Futures on August 29, 2024 and sell it today you would earn a total of 500.00 from holding Corn Futures or generate 1.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Corn Futures vs. Oat Futures
Performance |
| Timeline |
| Corn Futures |
| Oat Futures |
Corn Futures and Oat Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Corn Futures and Oat Futures
The main advantage of trading using opposite Corn Futures and Oat Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corn Futures position performs unexpectedly, Oat 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 Oat Futures will offset losses from the drop in Oat Futures' long position.| Corn Futures vs. Nasdaq 100 | Corn Futures vs. Oat Futures | Corn Futures vs. Wheat Futures | Corn Futures vs. Feeder Cattle Futures |
| Oat Futures vs. Class III Milk | Oat Futures vs. 30 Year Treasury | Oat Futures vs. Sugar | Oat Futures vs. Lean Hogs 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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