Correlation Between Teucrium Soybean and Invesco DB

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

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

Diversification Opportunities for Teucrium Soybean and Invesco DB

-0.37

Correlation Coefficient

Teucrium Soybean  Invesco DB

Very good diversification

The 3 months correlation between Teucrium and Invesco is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Teucrium Soybean and Invesco DB Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Agriculture and Teucrium Soybean 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 Teucrium Soybean are associated (or correlated) with Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Agriculture has no effect on the direction of Teucrium Soybean i.e., Teucrium Soybean and Invesco DB go up and down completely randomly.

Pair Corralation between Teucrium Soybean and Invesco DB

Given the investment horizon of 90 days Teucrium Soybean is expected to generate 1.54 times more return on investment than Invesco DB. However, Teucrium Soybean is 1.54 times more volatile than Invesco DB Agriculture. It trades about 0.21 of its potential returns per unit of risk. Invesco DB Agriculture is currently generating about 0.05 per unit of risk. If you would invest  2,072  in Teucrium Soybean on October 22, 2024 and sell it today you would earn a total of  109.00  from holding Teucrium Soybean or generate 5.26% return on investment over 90 days.

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

Teucrium Soybean  vs.  Invesco DB Agriculture

Teucrium Soybean

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Teucrium Soybean are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Teucrium Soybean is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Invesco DB Agriculture

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Agriculture are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Invesco DB may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Teucrium Soybean and Invesco DB

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

The idea behind Teucrium Soybean and Invesco DB Agriculture 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.