Correlation Between Soybean Futures and Feeder Cattle
Can any of the company-specific risk be diversified away by investing in both Soybean Futures 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 Soybean Futures and Feeder Cattle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Soybean Futures and Feeder Cattle Futures, you can compare the effects of market volatilities on Soybean Futures 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 Soybean Futures with a short position of Feeder Cattle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Soybean Futures and Feeder Cattle.
Diversification Opportunities for Soybean Futures and Feeder Cattle
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Soybean and Feeder is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Soybean Futures 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 Soybean 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 Soybean Futures 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 Soybean Futures i.e., Soybean Futures and Feeder Cattle go up and down completely randomly.
Pair Corralation between Soybean Futures and Feeder Cattle
Assuming the 90 days horizon Soybean Futures is expected to under-perform the Feeder Cattle. In addition to that, Soybean Futures is 1.49 times more volatile than Feeder Cattle Futures. It trades about -0.05 of its total potential returns per unit of risk. Feeder Cattle Futures is currently generating about 0.05 per unit of volatility. If you would invest 20,365 in Feeder Cattle Futures on August 26, 2024 and sell it today you would earn a total of 5,065 from holding Feeder Cattle Futures or generate 24.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.75% |
| Values | Daily Returns |
Soybean Futures vs. Feeder Cattle Futures
Performance |
| Timeline |
| Soybean Futures |
| Feeder Cattle Futures |
Soybean Futures and Feeder Cattle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Soybean Futures and Feeder Cattle
The main advantage of trading using opposite Soybean Futures and Feeder Cattle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Soybean Futures 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.| Soybean Futures vs. Crude Oil | Soybean Futures vs. Brent Crude Oil | Soybean Futures vs. E Mini SP 500 | Soybean Futures vs. 30 Year Treasury |
| Feeder Cattle vs. Heating Oil | Feeder Cattle vs. Crude Oil | Feeder Cattle vs. Aluminum Futures | Feeder Cattle vs. Corn 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |