Correlation Between Rough Rice and Wheat Futures
Can any of the company-specific risk be diversified away by investing in both Rough Rice and Wheat Futures 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 Wheat Futures 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 Wheat Futures, you can compare the effects of market volatilities on Rough Rice and Wheat Futures 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 Wheat Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rough Rice and Wheat Futures.
Diversification Opportunities for Rough Rice and Wheat Futures
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Rough and Wheat is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Rough Rice Futures and Wheat Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheat 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 Wheat Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheat Futures has no effect on the direction of Rough Rice i.e., Rough Rice and Wheat Futures go up and down completely randomly.
Pair Corralation between Rough Rice and Wheat Futures
Assuming the 90 days horizon Rough Rice Futures is expected to under-perform the Wheat Futures. In addition to that, Rough Rice is 1.22 times more volatile than Wheat Futures. It trades about -0.03 of its total potential returns per unit of risk. Wheat Futures is currently generating about -0.02 per unit of volatility. If you would invest 62,075 in Wheat Futures on August 29, 2024 and sell it today you would lose (6,525) from holding Wheat Futures or give up 10.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.06% |
| Values | Daily Returns |
Rough Rice Futures vs. Wheat Futures
Performance |
| Timeline |
| Rough Rice Futures |
| Wheat Futures |
Rough Rice and Wheat Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rough Rice and Wheat Futures
The main advantage of trading using opposite Rough Rice and Wheat Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rough Rice position performs unexpectedly, Wheat Futures 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 Wheat Futures will offset losses from the drop in Wheat Futures' long position.| Rough Rice vs. Copper | Rough Rice vs. Gold Futures | Rough Rice vs. Soybean Meal Futures | Rough Rice vs. Coffee |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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