Correlation Between Oat Futures and Orange Juice
Can any of the company-specific risk be diversified away by investing in both Oat Futures and Orange Juice 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 Oat Futures and Orange Juice into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oat Futures and Orange Juice, you can compare the effects of market volatilities on Oat Futures and Orange Juice 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 Oat Futures with a short position of Orange Juice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oat Futures and Orange Juice.
Diversification Opportunities for Oat Futures and Orange Juice
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Oat and Orange is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Oat Futures and Orange Juice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange Juice and Oat 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 Oat Futures are associated (or correlated) with Orange Juice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange Juice has no effect on the direction of Oat Futures i.e., Oat Futures and Orange Juice go up and down completely randomly.
Pair Corralation between Oat Futures and Orange Juice
Assuming the 90 days horizon Oat Futures is expected to under-perform the Orange Juice. In addition to that, Oat Futures is 1.43 times more volatile than Orange Juice. It trades about -0.15 of its total potential returns per unit of risk. Orange Juice is currently generating about 0.07 per unit of volatility. If you would invest 48,750 in Orange Juice on September 1, 2024 and sell it today you would earn a total of 1,300 from holding Orange Juice or generate 2.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Oat Futures vs. Orange Juice
Performance |
| Timeline |
| Oat Futures |
| Orange Juice |
Oat Futures and Orange Juice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oat Futures and Orange Juice
The main advantage of trading using opposite Oat Futures and Orange Juice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oat Futures position performs unexpectedly, Orange Juice 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 Orange Juice will offset losses from the drop in Orange Juice's long position.| Oat Futures vs. 2 Year T Note Futures | Oat Futures vs. Heating Oil | Oat Futures vs. Crude Oil | Oat Futures vs. Aluminum Futures |
| Orange Juice vs. Copper | Orange Juice vs. Gold Futures | Orange Juice vs. Soybean Meal Futures | Orange Juice vs. Coffee |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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