Correlation Between Orange Juice and Silver Futures

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

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

Diversification Opportunities for Orange Juice and Silver Futures

-0.84

Correlation Coefficient

Orange Juice  Silver Futures

Pay attention - limited upside

The 3 months correlation between Orange and Silver is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Orange Juice and Silver Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Futures and Orange Juice 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 Orange Juice are associated (or correlated) with Silver Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Futures has no effect on the direction of Orange Juice i.e., Orange Juice and Silver Futures go up and down completely randomly.

Pair Corralation between Orange Juice and Silver Futures

Assuming the 90 days horizon Orange Juice is expected to under-perform the Silver Futures. In addition to that, Orange Juice is 1.96 times more volatile than Silver Futures. It trades about -0.38 of its total potential returns per unit of risk. Silver Futures is currently generating about 0.19 per unit of volatility. If you would invest  2,941  in Silver Futures on December 29, 2024 and sell it today you would earn a total of  539.00  from holding Silver Futures or generate 18.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Orange Juice  vs.  Silver Futures

Orange Juice

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orange Juice has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Commodity's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for Orange Juice investors.

Silver Futures

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Futures are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Silver Futures exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orange Juice and Silver Futures

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

The idea behind Orange Juice and Silver 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.