Correlation Between 30 Day and Feeder Cattle
Can any of the company-specific risk be diversified away by investing in both 30 Day and Feeder Cattle 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 30 Day and Feeder Cattle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 30 Day Fed and Feeder Cattle Futures, you can compare the effects of market volatilities on 30 Day and Feeder Cattle 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 30 Day with a short position of Feeder Cattle. Check out your portfolio center. Please also check ongoing floating volatility patterns of 30 Day and Feeder Cattle.
Diversification Opportunities for 30 Day and Feeder Cattle
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ZQUSD and Feeder is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding 30 Day Fed and Feeder Cattle Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Feeder Cattle Futures and 30 Day 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 30 Day Fed are associated (or correlated) with Feeder Cattle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Feeder Cattle Futures has no effect on the direction of 30 Day i.e., 30 Day and Feeder Cattle go up and down completely randomly.
Pair Corralation between 30 Day and Feeder Cattle
Assuming the 90 days horizon 30 Day is expected to generate 8.45 times less return on investment than Feeder Cattle. But when comparing it to its historical volatility, 30 Day Fed is 10.54 times less risky than Feeder Cattle. It trades about 0.14 of its potential returns per unit of risk. Feeder Cattle Futures is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 25,183 in Feeder Cattle Futures on September 18, 2024 and sell it today you would earn a total of 372.00 from holding Feeder Cattle Futures or generate 1.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
30 Day Fed vs. Feeder Cattle Futures
Performance |
| Timeline |
| 30 Day Fed |
| Feeder Cattle Futures |
30 Day and Feeder Cattle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 30 Day and Feeder Cattle
The main advantage of trading using opposite 30 Day and Feeder Cattle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 30 Day position performs unexpectedly, Feeder Cattle 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 Feeder Cattle will offset losses from the drop in Feeder Cattle's long position.| 30 Day vs. Natural Gas | 30 Day vs. Five Year Treasury Note | 30 Day vs. Micro Gold Futures | 30 Day vs. Class III Milk |
| Feeder Cattle vs. Orange Juice | Feeder Cattle vs. Brent Crude Oil | Feeder Cattle vs. Natural Gas | Feeder Cattle vs. Five Year Treasury Note |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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