Correlation Between Corn Futures and Palladium

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

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

Diversification Opportunities for Corn Futures and Palladium

-0.46

Correlation Coefficient

Corn Futures  Palladium

Very good diversification

The 3 months correlation between Corn and Palladium is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Corn Futures and Palladium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palladium 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 Palladium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palladium has no effect on the direction of Corn Futures i.e., Corn Futures and Palladium go up and down completely randomly.

Pair Corralation between Corn Futures and Palladium

Assuming the 90 days horizon Corn Futures is expected to generate 0.56 times more return on investment than Palladium. However, Corn Futures is 1.79 times less risky than Palladium. It trades about -0.03 of its potential returns per unit of risk. Palladium is currently generating about -0.02 per unit of risk. If you would invest  53,725  in Corn Futures on September 12, 2024 and sell it today you would lose (8,825) from holding Corn Futures or give up 16.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.17%
Values	Daily Returns

Corn Futures  vs.  Palladium

Corn Futures

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Corn Futures are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Corn Futures may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Palladium

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Corn Futures and Palladium

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

The idea behind Corn Futures and Palladium 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.