Correlation Between Feeder Cattle and Class III
Can any of the company-specific risk be diversified away by investing in both Feeder Cattle and Class III 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 Feeder Cattle and Class III into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Feeder Cattle Futures and Class III Milk, you can compare the effects of market volatilities on Feeder Cattle and Class III 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 Feeder Cattle with a short position of Class III. Check out your portfolio center. Please also check ongoing floating volatility patterns of Feeder Cattle and Class III.
Diversification Opportunities for Feeder Cattle and Class III
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Feeder and Class is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Feeder Cattle Futures and Class III Milk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Class III Milk and Feeder Cattle 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 Feeder Cattle Futures are associated (or correlated) with Class III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Class III Milk has no effect on the direction of Feeder Cattle i.e., Feeder Cattle and Class III go up and down completely randomly.
Pair Corralation between Feeder Cattle and Class III
Assuming the 90 days horizon Feeder Cattle Futures is expected to generate 0.47 times more return on investment than Class III. However, Feeder Cattle Futures is 2.12 times less risky than Class III. It trades about 0.13 of its potential returns per unit of risk. Class III Milk is currently generating about 0.02 per unit of risk. If you would invest 25,685 in Feeder Cattle Futures on December 2, 2024 and sell it today you would earn a total of 1,813 from holding Feeder Cattle Futures or generate 7.06% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.38% |
Values | Daily Returns |
Feeder Cattle Futures vs. Class III Milk
Performance |
Timeline |
Feeder Cattle Futures |
Class III Milk |
Feeder Cattle and Class III Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Feeder Cattle and Class III
The main advantage of trading using opposite Feeder Cattle and Class III positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Feeder Cattle position performs unexpectedly, Class III 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 Class III will offset losses from the drop in Class III's long position.Feeder Cattle vs. Orange Juice | Feeder Cattle vs. Live Cattle Futures | Feeder Cattle vs. Micro Gold Futures | Feeder Cattle vs. Lean Hogs Futures |
Class III vs. Silver Futures | Class III vs. Live Cattle Futures | Class III vs. Heating Oil | Class III 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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