Correlation Between Gold Futures and Sugar
Can any of the company-specific risk be diversified away by investing in both Gold Futures 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 Gold Futures and Sugar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Futures and Sugar, you can compare the effects of market volatilities on Gold Futures 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 Gold Futures with a short position of Sugar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Futures and Sugar.
Diversification Opportunities for Gold Futures and Sugar
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Gold and Sugar is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Gold Futures and Sugar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sugar and Gold 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 Gold Futures 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 Gold Futures i.e., Gold Futures and Sugar go up and down completely randomly.
Pair Corralation between Gold Futures and Sugar
Assuming the 90 days horizon Gold Futures is expected to generate 0.47 times more return on investment than Sugar. However, Gold Futures is 2.13 times less risky than Sugar. It trades about 0.29 of its potential returns per unit of risk. Sugar is currently generating about 0.01 per unit of risk. If you would invest 261,810 in Gold Futures on December 28, 2024 and sell it today you would earn a total of 45,090 from holding Gold Futures or generate 17.22% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.44% |
Values | Daily Returns |
Gold Futures vs. Sugar
Performance |
Timeline |
Gold Futures |
Sugar |
Gold Futures and Sugar Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Gold Futures and Sugar
The main advantage of trading using opposite Gold Futures and Sugar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Futures 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.Gold Futures vs. US Dollar | Gold Futures vs. Five Year Treasury Note | Gold Futures vs. Live Cattle Futures | Gold Futures vs. Cotton |
Sugar vs. Crude Oil | Sugar vs. 30 Year Treasury | Sugar vs. Lean Hogs Futures | Sugar vs. Micro Silver 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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