Correlation Between Rough Rice and Silver Futures

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

Diversification Opportunities for Rough Rice and Silver Futures

-0.02

Correlation Coefficient

Rough Rice  Silver Futures

Good diversification

The 3 months correlation between Rough and Silver is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Rough Rice Futures and Silver Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 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 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 Rough Rice i.e., Rough Rice and Silver Futures go up and down completely randomly.

Pair Corralation between Rough Rice and Silver Futures

Assuming the 90 days horizon Rough Rice is expected to generate 2.12 times less return on investment than Silver Futures. But when comparing it to its historical volatility, Rough Rice Futures is 1.99 times less risky than Silver Futures. It trades about 0.04 of its potential returns per unit of risk. Silver Futures is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,914  in Silver Futures on August 30, 2024 and sell it today you would earn a total of  143.00  from holding Silver Futures or generate 4.91% return on investment over 90 days.

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

Rough Rice Futures  vs.  Silver Futures

Rough Rice Futures

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rough Rice Futures are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Rough Rice is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Silver Futures

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Futures are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Rough Rice and Silver Futures

The main advantage of trading using opposite Rough Rice and Silver Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rough Rice 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 Rough Rice 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.