Correlation Between Rough Rice and Micro Silver

Can any of the company-specific risk be diversified away by investing in both Rough Rice and Micro Silver 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 Micro Silver 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 Micro Silver Futures, you can compare the effects of market volatilities on Rough Rice and Micro Silver 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 Micro Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rough Rice and Micro Silver.

Diversification Opportunities for Rough Rice and Micro Silver

-0.63

Correlation Coefficient

Rough Rice  Micro Silver

Excellent diversification

The 3 months correlation between Rough and Micro is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Rough Rice Futures and Micro Silver Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Silver Futures 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 Micro Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Silver Futures has no effect on the direction of Rough Rice i.e., Rough Rice and Micro Silver go up and down completely randomly.

Pair Corralation between Rough Rice and Micro Silver

Assuming the 90 days horizon Rough Rice Futures is expected to under-perform the Micro Silver. But the commodity apears to be less risky and, when comparing its historical volatility, Rough Rice Futures is 1.22 times less risky than Micro Silver. The commodity trades about -0.03 of its potential returns per unit of risk. The Micro Silver Futures is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,941  in Micro Silver Futures on December 29, 2024 and sell it today you would earn a total of  541.00  from holding Micro Silver Futures or generate 18.4% return on investment over 90 days.

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

Rough Rice Futures  vs.  Micro Silver Futures

Rough Rice Futures

Risk-Adjusted Performance

Very Weak

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

Micro Silver Futures

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Silver Futures are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Micro Silver exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rough Rice and Micro Silver

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

The idea behind Rough Rice Futures and Micro 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.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.