Correlation Between Soybean Meal and 10 Year
Can any of the company-specific risk be diversified away by investing in both Soybean Meal and 10 Year 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 10 Year 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 10 Year T Note Futures, you can compare the effects of market volatilities on Soybean Meal and 10 Year 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 10 Year. Check out your portfolio center. Please also check ongoing floating volatility patterns of Soybean Meal and 10 Year.
Diversification Opportunities for Soybean Meal and 10 Year
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Soybean and ZNUSD is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Soybean Meal Futures and 10 Year T Note Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 10 Year T 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 10 Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 10 Year T has no effect on the direction of Soybean Meal i.e., Soybean Meal and 10 Year go up and down completely randomly.
Pair Corralation between Soybean Meal and 10 Year
Assuming the 90 days horizon Soybean Meal Futures is expected to under-perform the 10 Year. In addition to that, Soybean Meal is 4.19 times more volatile than 10 Year T Note Futures. It trades about -0.03 of its total potential returns per unit of risk. 10 Year T Note Futures is currently generating about -0.01 per unit of volatility. If you would invest 11,359 in 10 Year T Note Futures on August 25, 2024 and sell it today you would lose (401.00) from holding 10 Year T Note Futures or give up 3.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.04% |
| Values | Daily Returns |
Soybean Meal Futures vs. 10 Year T Note Futures
Performance |
| Timeline |
| Soybean Meal Futures |
| 10 Year T |
Soybean Meal and 10 Year Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Soybean Meal and 10 Year
The main advantage of trading using opposite Soybean Meal and 10 Year positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Soybean Meal position performs unexpectedly, 10 Year 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 10 Year will offset losses from the drop in 10 Year's long position.| Soybean Meal vs. Micro Gold Futures | Soybean Meal vs. Crude Oil | Soybean Meal vs. Live Cattle Futures | Soybean Meal vs. 2 Year T Note 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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