Correlation Between US Dollar and Sugar

Can any of the company-specific risk be diversified away by investing in both US Dollar and Sugar 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 US Dollar and Sugar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US Dollar and Sugar, you can compare the effects of market volatilities on US Dollar and Sugar 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 US Dollar with a short position of Sugar. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Dollar and Sugar.

Diversification Opportunities for US Dollar and Sugar

-0.85

Correlation Coefficient

US Dollar  Sugar

Pay attention - limited upside

The 3 months correlation between DXUSD and Sugar is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding US Dollar and Sugar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sugar and US Dollar 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 US Dollar are associated (or correlated) with Sugar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sugar has no effect on the direction of US Dollar i.e., US Dollar and Sugar go up and down completely randomly.

Pair Corralation between US Dollar and Sugar

Assuming the 90 days horizon US Dollar is expected to generate 0.28 times more return on investment than Sugar. However, US Dollar is 3.54 times less risky than Sugar. It trades about 0.02 of its potential returns per unit of risk. Sugar is currently generating about -0.01 per unit of risk. If you would invest  10,605  in US Dollar on November 28, 2024 and sell it today you would earn a total of  42.00  from holding US Dollar or generate 0.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

US Dollar  vs.  Sugar

US Dollar

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in US Dollar are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, US Dollar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Sugar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sugar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sugar is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with US Dollar and Sugar

The main advantage of trading using opposite US Dollar and Sugar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Dollar position performs unexpectedly, Sugar 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 Sugar will offset losses from the drop in Sugar's long position.

The idea behind US Dollar and Sugar pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.