Correlation Between E Mini and Sugar

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

By analyzing existing cross correlation between E Mini SP 500 and Sugar, you can compare the effects of market volatilities on E Mini 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 E Mini with a short position of Sugar. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Mini and Sugar.

Diversification Opportunities for E Mini and Sugar

0.07

Correlation Coefficient

E Mini  Sugar

Significant diversification

The 3 months correlation between ESUSD and Sugar is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding E Mini SP 500 and Sugar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sugar and E Mini 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 E Mini SP 500 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 E Mini i.e., E Mini and Sugar go up and down completely randomly.

Pair Corralation between E Mini and Sugar

Assuming the 90 days horizon E Mini SP 500 is expected to generate 0.32 times more return on investment than Sugar. However, E Mini SP 500 is 3.14 times less risky than Sugar. It trades about 0.12 of its potential returns per unit of risk. Sugar is currently generating about 0.0 per unit of risk. If you would invest  601,300  in E Mini SP 500 on September 13, 2024 and sell it today you would earn a total of  7,475  from holding E Mini SP 500 or generate 1.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

E Mini SP 500  vs.  Sugar

E Mini SP

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in E Mini SP 500 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, E Mini may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sugar

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sugar are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sugar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with E Mini and Sugar

The main advantage of trading using opposite E Mini and Sugar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Mini 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 E Mini SP 500 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.