Correlation Between Rough Rice and Lean Hogs
Can any of the company-specific risk be diversified away by investing in both Rough Rice and Lean Hogs 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 Rough Rice and Lean Hogs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rough Rice Futures and Lean Hogs Futures, you can compare the effects of market volatilities on Rough Rice and Lean Hogs 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 Rough Rice with a short position of Lean Hogs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rough Rice and Lean Hogs.
Diversification Opportunities for Rough Rice and Lean Hogs
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rough and Lean is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Rough Rice Futures and Lean Hogs Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lean Hogs Futures and Rough Rice 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 Rough Rice Futures are associated (or correlated) with Lean Hogs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lean Hogs Futures has no effect on the direction of Rough Rice i.e., Rough Rice and Lean Hogs go up and down completely randomly.
Pair Corralation between Rough Rice and Lean Hogs
Assuming the 90 days horizon Rough Rice Futures is expected to generate 0.9 times more return on investment than Lean Hogs. However, Rough Rice Futures is 1.11 times less risky than Lean Hogs. It trades about 0.25 of its potential returns per unit of risk. Lean Hogs Futures is currently generating about -0.17 per unit of risk. If you would invest 1,411 in Rough Rice Futures on October 22, 2024 and sell it today you would earn a total of 70.00 from holding Rough Rice Futures or generate 4.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rough Rice Futures vs. Lean Hogs Futures
Performance |
| Timeline |
| Rough Rice Futures |
| Lean Hogs Futures |
Rough Rice and Lean Hogs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rough Rice and Lean Hogs
The main advantage of trading using opposite Rough Rice and Lean Hogs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rough Rice position performs unexpectedly, Lean Hogs 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 Lean Hogs will offset losses from the drop in Lean Hogs' long position.| Rough Rice vs. 30 Year Treasury | Rough Rice vs. 2 Year T Note Futures | Rough Rice vs. Orange Juice | Rough Rice vs. Heating Oil |
| Lean Hogs vs. Crude Oil | Lean Hogs vs. Palladium | Lean Hogs vs. Gasoline RBOB | Lean Hogs vs. Rough Rice 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |