Correlation Between Copper and Soybean Meal

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

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

Diversification Opportunities for Copper and Soybean Meal

0.68

Correlation Coefficient

Copper  Soybean Meal

Poor diversification

The 3 months correlation between Copper and Soybean is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Copper and Soybean Meal Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soybean Meal Futures and Copper 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 Copper are associated (or correlated) with Soybean Meal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soybean Meal Futures has no effect on the direction of Copper i.e., Copper and Soybean Meal go up and down completely randomly.

Pair Corralation between Copper and Soybean Meal

Assuming the 90 days horizon Copper is expected to under-perform the Soybean Meal. In addition to that, Copper is 1.82 times more volatile than Soybean Meal Futures. It trades about -0.11 of its total potential returns per unit of risk. Soybean Meal Futures is currently generating about -0.13 per unit of volatility. If you would invest  29,960  in Soybean Meal Futures on September 5, 2024 and sell it today you would lose (920.00) from holding Soybean Meal Futures or give up 3.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Copper  vs.  Soybean Meal Futures

Copper

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Copper are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Copper is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Soybean Meal Futures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soybean Meal Futures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Commodity's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Soybean Meal Futures shareholders.

Pair Trading with Copper and Soybean Meal

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

The idea behind Copper and Soybean Meal 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.