Correlation Between Corn Futures and Copper

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

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

Diversification Opportunities for Corn Futures and Copper

0.7

Correlation Coefficient

Corn Futures  Copper

Poor diversification

The 3 months correlation between Corn and Copper is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Corn Futures and Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper and Corn 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 Corn Futures are associated (or correlated) with Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copper has no effect on the direction of Corn Futures i.e., Corn Futures and Copper go up and down completely randomly.

Pair Corralation between Corn Futures and Copper

Assuming the 90 days horizon Corn Futures is expected to generate 3.3 times less return on investment than Copper. But when comparing it to its historical volatility, Corn Futures is 1.11 times less risky than Copper. It trades about 0.02 of its potential returns per unit of risk. Copper is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  393.00  in Copper on December 4, 2024 and sell it today you would earn a total of  66.00  from holding Copper or generate 16.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.65%
Values	Daily Returns

Corn Futures  vs.  Copper

Corn Futures

Risk-Adjusted Performance

Modest

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

Copper

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Copper are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Copper may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Corn Futures and Copper

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

The idea behind Corn Futures and Copper 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.