Correlation Between Rough Rice and Sugar
Can any of the company-specific risk be diversified away by investing in both Rough Rice and Sugar 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 Rough Rice and Sugar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rough Rice Futures and Sugar, you can compare the effects of market volatilities on Rough Rice and Sugar 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 Rough Rice with a short position of Sugar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rough Rice and Sugar.
Diversification Opportunities for Rough Rice and Sugar
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Rough and Sugar is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Rough Rice Futures and Sugar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sugar and Rough Rice 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 Rough Rice Futures are associated (or correlated) with Sugar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sugar has no effect on the direction of Rough Rice i.e., Rough Rice and Sugar go up and down completely randomly.
Pair Corralation between Rough Rice and Sugar
Assuming the 90 days horizon Rough Rice Futures is expected to under-perform the Sugar. But the commodity apears to be less risky and, when comparing its historical volatility, Rough Rice Futures is 1.54 times less risky than Sugar. The commodity trades about -0.18 of its potential returns per unit of risk. The Sugar is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 2,107 in Sugar on December 1, 2024 and sell it today you would lose (156.00) from holding Sugar or give up 7.4% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Rough Rice Futures vs. Sugar
Performance |
Timeline |
Rough Rice Futures |
Sugar |
Rough Rice and Sugar Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Rough Rice and Sugar
The main advantage of trading using opposite Rough Rice and Sugar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rough Rice position performs unexpectedly, Sugar 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 Sugar will offset losses from the drop in Sugar's long position.Rough Rice vs. Mini Dow Jones | Rough Rice vs. 2 Year T Note Futures | Rough Rice vs. Brent Crude Oil | Rough Rice vs. Heating Oil |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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