Correlation Between Silver Futures and Five Year

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

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

Diversification Opportunities for Silver Futures and Five Year

-0.25

Correlation Coefficient

Silver Futures  Five Year

Very good diversification

The 3 months correlation between Silver and Five is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Silver Futures and Five Year Treasury Note in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Year Treasury and Silver 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 Silver Futures are associated (or correlated) with Five Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Year Treasury has no effect on the direction of Silver Futures i.e., Silver Futures and Five Year go up and down completely randomly.

Pair Corralation between Silver Futures and Five Year

Assuming the 90 days horizon Silver Futures is expected to generate 9.14 times more return on investment than Five Year. However, Silver Futures is 9.14 times more volatile than Five Year Treasury Note. It trades about 0.08 of its potential returns per unit of risk. Five Year Treasury Note is currently generating about -0.11 per unit of risk. If you would invest  2,795  in Silver Futures on September 3, 2024 and sell it today you would earn a total of  274.00  from holding Silver Futures or generate 9.8% return on investment over 90 days.

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

Silver Futures  vs.  Five Year Treasury Note

Silver Futures

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Futures are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Silver Futures may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Five Year Treasury

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Five Year Treasury Note has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Five Year is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Silver Futures and Five Year

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

The idea behind Silver Futures and Five Year Treasury Note 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.