Correlation Between Teucrium Soybean and Teucrium Wheat

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

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

Diversification Opportunities for Teucrium Soybean and Teucrium Wheat

0.72

Correlation Coefficient

Teucrium Soybean  Teucrium Wheat

Poor diversification

The 3 months correlation between Teucrium and Teucrium is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Teucrium Soybean and Teucrium Wheat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teucrium Wheat 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 Teucrium Wheat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teucrium Wheat has no effect on the direction of Teucrium Soybean i.e., Teucrium Soybean and Teucrium Wheat go up and down completely randomly.

Pair Corralation between Teucrium Soybean and Teucrium Wheat

Given the investment horizon of 90 days Teucrium Soybean is expected to generate 0.73 times more return on investment than Teucrium Wheat. However, Teucrium Soybean is 1.36 times less risky than Teucrium Wheat. It trades about -0.11 of its potential returns per unit of risk. Teucrium Wheat is currently generating about -0.09 per unit of risk. If you would invest  2,224  in Teucrium Soybean on September 18, 2024 and sell it today you would lose (128.00) from holding Teucrium Soybean or give up 5.76% of portfolio value over 90 days.

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

Teucrium Soybean  vs.  Teucrium Wheat

Teucrium Soybean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teucrium Soybean has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Teucrium Wheat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teucrium Wheat has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Teucrium Soybean and Teucrium Wheat

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

The idea behind Teucrium Soybean and Teucrium Wheat 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.