Correlation Between Soybean Futures and E Mini

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

By analyzing existing cross correlation between Soybean Futures and E Mini SP 500, you can compare the effects of market volatilities on Soybean Futures and E Mini 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 Soybean Futures with a short position of E Mini. Check out your portfolio center. Please also check ongoing floating volatility patterns of Soybean Futures and E Mini.

Diversification Opportunities for Soybean Futures and E Mini

0.58

Correlation Coefficient

Soybean Futures  E Mini

Very weak diversification

The 3 months correlation between Soybean and ESUSD is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Soybean Futures and E Mini SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Mini SP and Soybean 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 Soybean Futures are associated (or correlated) with E Mini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Mini SP has no effect on the direction of Soybean Futures i.e., Soybean Futures and E Mini go up and down completely randomly.

Pair Corralation between Soybean Futures and E Mini

Assuming the 90 days horizon Soybean Futures is expected to generate 1.06 times more return on investment than E Mini. However, Soybean Futures is 1.06 times more volatile than E Mini SP 500. It trades about 0.05 of its potential returns per unit of risk. E Mini SP 500 is currently generating about -0.08 per unit of risk. If you would invest  99,175  in Soybean Futures on December 29, 2024 and sell it today you would earn a total of  3,125  from holding Soybean Futures or generate 3.15% return on investment over 90 days.

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

Soybean Futures  vs.  E Mini SP 500

Soybean Futures

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Soybean Futures are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Soybean Futures is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

E Mini SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days E Mini SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, E Mini is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Soybean Futures and E Mini

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

The idea behind Soybean Futures and E Mini SP 500 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.