Correlation Between Lean Hogs and Platinum

Can any of the company-specific risk be diversified away by investing in both Lean Hogs and Platinum 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 Platinum 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 Platinum, you can compare the effects of market volatilities on Lean Hogs and Platinum 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 Platinum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lean Hogs and Platinum.

Diversification Opportunities for Lean Hogs and Platinum

0.36

Correlation Coefficient

Lean Hogs  Platinum

Weak diversification

The 3 months correlation between Lean and Platinum is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lean Hogs Futures and Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum 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 Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum has no effect on the direction of Lean Hogs i.e., Lean Hogs and Platinum go up and down completely randomly.

Pair Corralation between Lean Hogs and Platinum

Assuming the 90 days horizon Lean Hogs is expected to generate 2.53 times less return on investment than Platinum. But when comparing it to its historical volatility, Lean Hogs Futures is 1.09 times less risky than Platinum. It trades about 0.02 of its potential returns per unit of risk. Platinum is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  94,890  in Platinum on December 21, 2024 and sell it today you would earn a total of  4,420  from holding Platinum or generate 4.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Lean Hogs Futures  vs.  Platinum

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.

Platinum

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Platinum are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Platinum is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lean Hogs and Platinum

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

The idea behind Lean Hogs Futures and Platinum 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..