Correlation Between Five Year and Copper
Can any of the company-specific risk be diversified away by investing in both Five Year and Copper 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 Five Year and Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Five Year Treasury Note and Copper, you can compare the effects of market volatilities on Five Year and Copper 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 Five Year with a short position of Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Year and Copper.
Diversification Opportunities for Five Year and Copper
Pay attention - limited upside
The 3 months correlation between Five and Copper is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Five Year Treasury Note and Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper and Five Year 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 Five Year Treasury Note are associated (or correlated) with Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copper has no effect on the direction of Five Year i.e., Five Year and Copper go up and down completely randomly.
Pair Corralation between Five Year and Copper
Assuming the 90 days horizon Five Year is expected to generate 107.42 times less return on investment than Copper. But when comparing it to its historical volatility, Five Year Treasury Note is 4.72 times less risky than Copper. It trades about 0.01 of its potential returns per unit of risk. Copper is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 403.00 in Copper on November 3, 2024 and sell it today you would earn a total of 23.00 from holding Copper or generate 5.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Five Year Treasury Note vs. Copper
Performance |
| Timeline |
| Five Year Treasury |
| Copper |
Five Year and Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Five Year and Copper
The main advantage of trading using opposite Five Year and Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Year position performs unexpectedly, Copper 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 Copper will offset losses from the drop in Copper's long position.| Five Year vs. Mini Dow Jones | Five Year vs. Gasoline RBOB | Five Year vs. Rough Rice Futures | Five Year vs. Platinum |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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