Correlation Between 2 Year and Soybean Futures
Can any of the company-specific risk be diversified away by investing in both 2 Year and Soybean 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 2 Year and Soybean Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 2 Year T Note Futures and Soybean Futures, you can compare the effects of market volatilities on 2 Year and Soybean 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 2 Year with a short position of Soybean Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of 2 Year and Soybean Futures.
Diversification Opportunities for 2 Year and Soybean Futures
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ZTUSD and Soybean is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding 2 Year T Note Futures and Soybean Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soybean Futures and 2 Year 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 2 Year T Note Futures are associated (or correlated) with Soybean Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soybean Futures has no effect on the direction of 2 Year i.e., 2 Year and Soybean Futures go up and down completely randomly.
Pair Corralation between 2 Year and Soybean Futures
Assuming the 90 days horizon 2 Year T Note Futures is expected to generate 0.1 times more return on investment than Soybean Futures. However, 2 Year T Note Futures is 10.14 times less risky than Soybean Futures. It trades about -0.42 of its potential returns per unit of risk. Soybean Futures is currently generating about -0.13 per unit of risk. If you would invest 10,440 in 2 Year T Note Futures on August 25, 2024 and sell it today you would lose (189.00) from holding 2 Year T Note Futures or give up 1.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
2 Year T Note Futures vs. Soybean Futures
Performance |
| Timeline |
| 2 Year T |
| Soybean Futures |
2 Year and Soybean Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 2 Year and Soybean Futures
The main advantage of trading using opposite 2 Year and Soybean Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 2 Year position performs unexpectedly, Soybean 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 Soybean Futures will offset losses from the drop in Soybean Futures' long position.| 2 Year vs. 30 Year Treasury | 2 Year vs. 30 Day Fed | 2 Year vs. Class III Milk | 2 Year vs. 10 Year T Note Futures |
| Soybean Futures vs. Crude Oil | Soybean Futures vs. Brent Crude Oil | Soybean Futures vs. E Mini SP 500 | Soybean Futures vs. 30 Year Treasury |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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