Correlation Between Lean Hogs and Copper

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

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

Diversification Opportunities for Lean Hogs and Copper

0.66

Correlation Coefficient

Lean Hogs  Copper

Poor diversification

The 3 months correlation between Lean and Copper is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Lean Hogs Futures and Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper and Lean Hogs 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 Lean Hogs Futures are associated (or correlated) with Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copper has no effect on the direction of Lean Hogs i.e., Lean Hogs and Copper go up and down completely randomly.

Pair Corralation between Lean Hogs and Copper

Assuming the 90 days horizon Lean Hogs is expected to generate 4.32 times less return on investment than Copper. In addition to that, Lean Hogs is 1.17 times more volatile than Copper. It trades about 0.02 of its total potential returns per unit of risk. Copper is currently generating about 0.12 per unit of volatility. If you would invest  420.00  in Copper on December 4, 2024 and sell it today you would earn a total of  39.00  from holding Copper or generate 9.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.75%
Values	Daily Returns

Lean Hogs Futures  vs.  Copper

Lean Hogs Futures

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lean Hogs Futures are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Lean Hogs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Copper

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Copper are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Copper may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lean Hogs and Copper

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

The idea behind Lean Hogs Futures and Copper 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.