Correlation Between Oat Futures and Silver Futures

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

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

Diversification Opportunities for Oat Futures and Silver Futures

0.42

Correlation Coefficient

Oat Futures  Silver Futures

Very weak diversification

The 3 months correlation between Oat and Silver is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Oat Futures and Silver Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Futures and Oat 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 Oat Futures are associated (or correlated) with Silver Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Futures has no effect on the direction of Oat Futures i.e., Oat Futures and Silver Futures go up and down completely randomly.

Pair Corralation between Oat Futures and Silver Futures

Assuming the 90 days horizon Oat Futures is expected to generate 1.31 times more return on investment than Silver Futures. However, Oat Futures is 1.31 times more volatile than Silver Futures. It trades about 0.02 of its potential returns per unit of risk. Silver Futures is currently generating about 0.01 per unit of risk. If you would invest  36,325  in Oat Futures on September 15, 2024 and sell it today you would earn a total of  550.00  from holding Oat Futures or generate 1.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Oat Futures  vs.  Silver Futures

Oat Futures

Risk-Adjusted Performance

1 of 100

Weak

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

Silver Futures

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Oat Futures and Silver Futures

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

The idea behind Oat Futures and Silver Futures 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.