Correlation Between Wheat Futures and E Mini

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

By analyzing existing cross correlation between Wheat Futures and E Mini SP 500, you can compare the effects of market volatilities on Wheat Futures and E Mini 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 Wheat Futures with a short position of E Mini. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wheat Futures and E Mini.

Diversification Opportunities for Wheat Futures and E Mini

-0.58

Correlation Coefficient

Wheat Futures  E Mini

Excellent diversification

The 3 months correlation between Wheat and ESUSD is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Wheat Futures and E Mini SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Mini SP and Wheat 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 Wheat Futures are associated (or correlated) with E Mini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Mini SP has no effect on the direction of Wheat Futures i.e., Wheat Futures and E Mini go up and down completely randomly.

Pair Corralation between Wheat Futures and E Mini

Assuming the 90 days horizon Wheat Futures is expected to under-perform the E Mini. In addition to that, Wheat Futures is 2.24 times more volatile than E Mini SP 500. It trades about -0.04 of its total potential returns per unit of risk. E Mini SP 500 is currently generating about 0.12 per unit of volatility. If you would invest  441,250  in E Mini SP 500 on September 12, 2024 and sell it today you would earn a total of  163,925  from holding E Mini SP 500 or generate 37.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.23%
Values	Daily Returns

Wheat Futures  vs.  E Mini SP 500

Wheat Futures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wheat Futures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Wheat Futures is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

E Mini SP

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in E Mini SP 500 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, E Mini may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wheat Futures and E Mini

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

The idea behind Wheat Futures and E Mini SP 500 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.