Correlation Between Oat Futures and Rough Rice
Can any of the company-specific risk be diversified away by investing in both Oat Futures and Rough Rice 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 Rough Rice into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oat Futures and Rough Rice Futures, you can compare the effects of market volatilities on Oat Futures and Rough Rice 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 Rough Rice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oat Futures and Rough Rice.
Diversification Opportunities for Oat Futures and Rough Rice
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Oat and Rough is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Oat Futures and Rough Rice Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rough Rice Futures 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 Rough Rice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rough Rice Futures has no effect on the direction of Oat Futures i.e., Oat Futures and Rough Rice go up and down completely randomly.
Pair Corralation between Oat Futures and Rough Rice
Assuming the 90 days horizon Oat Futures is expected to generate 0.95 times more return on investment than Rough Rice. However, Oat Futures is 1.05 times less risky than Rough Rice. It trades about 0.0 of its potential returns per unit of risk. Rough Rice Futures is currently generating about -0.03 per unit of risk. If you would invest 38,425 in Oat Futures on August 29, 2024 and sell it today you would lose (1,375) from holding Oat Futures or give up 3.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oat Futures vs. Rough Rice Futures
Performance |
| Timeline |
| Oat Futures |
| Rough Rice Futures |
Oat Futures and Rough Rice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oat Futures and Rough Rice
The main advantage of trading using opposite Oat Futures and Rough Rice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oat Futures position performs unexpectedly, Rough Rice 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 Rough Rice will offset losses from the drop in Rough Rice's long position.| Oat Futures vs. Class III Milk | Oat Futures vs. 30 Year Treasury | Oat Futures vs. Sugar | Oat Futures vs. Lean Hogs Futures |
| Rough Rice vs. Copper | Rough Rice vs. Gold Futures | Rough Rice vs. Soybean Meal Futures | Rough Rice 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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