Correlation Between E Mini and Corn Futures

Can any of the company-specific risk be diversified away by investing in both E Mini and Corn 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 E Mini and Corn Futures 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 Corn Futures, you can compare the effects of market volatilities on E Mini and Corn 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 E Mini with a short position of Corn Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Mini and Corn Futures.

Diversification Opportunities for E Mini and Corn Futures

0.62

Correlation Coefficient

E Mini  Corn Futures

Poor diversification

The 3 months correlation between ESUSD and Corn is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding E Mini SP 500 and Corn Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corn Futures 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 Corn Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corn Futures has no effect on the direction of E Mini i.e., E Mini and Corn Futures go up and down completely randomly.

Pair Corralation between E Mini and Corn Futures

If you would invest  45,225  in Corn Futures on December 28, 2024 and sell it today you would lose (225.00) from holding Corn Futures or give up 0.5% of portfolio value over 90 days.

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

E Mini SP 500  vs.  Corn Futures

E Mini SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days E Mini SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, E Mini is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Corn Futures

Risk-Adjusted Performance

Very Weak

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

Pair Trading with E Mini and Corn Futures

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

The idea behind E Mini SP 500 and Corn Futures 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.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.