Correlation Between Soybean Meal and Corn Futures
Can any of the company-specific risk be diversified away by investing in both Soybean Meal and Corn 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 Soybean Meal and Corn Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Soybean Meal Futures and Corn Futures, you can compare the effects of market volatilities on Soybean Meal and Corn 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 Soybean Meal with a short position of Corn Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Soybean Meal and Corn Futures.
Diversification Opportunities for Soybean Meal and Corn Futures
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Soybean and Corn is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Soybean Meal Futures and Corn Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corn Futures and Soybean Meal 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 Soybean Meal Futures are associated (or correlated) with Corn Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corn Futures has no effect on the direction of Soybean Meal i.e., Soybean Meal and Corn Futures go up and down completely randomly.
Pair Corralation between Soybean Meal and Corn Futures
Assuming the 90 days horizon Soybean Meal Futures is expected to under-perform the Corn Futures. But the commodity apears to be less risky and, when comparing its historical volatility, Soybean Meal Futures is 1.15 times less risky than Corn Futures. The commodity trades about -0.12 of its potential returns per unit of risk. The Corn Futures is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 41,450 in Corn Futures on September 2, 2024 and sell it today you would earn a total of 1,850 from holding Corn Futures or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Soybean Meal Futures vs. Corn Futures
Performance |
| Timeline |
| Soybean Meal Futures |
| Corn Futures |
Soybean Meal and Corn Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Soybean Meal and Corn Futures
The main advantage of trading using opposite Soybean Meal and Corn Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Soybean Meal position performs unexpectedly, Corn 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 Corn Futures will offset losses from the drop in Corn Futures' long position.| Soybean Meal vs. 2 Year T Note Futures | Soybean Meal vs. Soybean Futures | Soybean Meal vs. Lean Hogs Futures | Soybean Meal vs. Rough Rice Futures |
| Corn Futures vs. 2 Year T Note Futures | Corn Futures vs. Heating Oil | Corn Futures vs. Crude Oil | Corn Futures vs. Aluminum 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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