Correlation Between Soybean Futures and Mini Dow

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

By analyzing existing cross correlation between Soybean Futures and Mini Dow Jones, you can compare the effects of market volatilities on Soybean Futures and Mini Dow 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 Mini Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Soybean Futures and Mini Dow.

Diversification Opportunities for Soybean Futures and Mini Dow

-0.27

Correlation Coefficient

Soybean Futures  Mini Dow

Very good diversification

The 3 months correlation between Soybean and Mini is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Soybean Futures and Mini Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mini Dow Jones 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 Mini Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mini Dow Jones has no effect on the direction of Soybean Futures i.e., Soybean Futures and Mini Dow go up and down completely randomly.

Pair Corralation between Soybean Futures and Mini Dow

Assuming the 90 days horizon Soybean Futures is expected to under-perform the Mini Dow. In addition to that, Soybean Futures is 1.28 times more volatile than Mini Dow Jones. It trades about -0.03 of its total potential returns per unit of risk. Mini Dow Jones is currently generating about 0.16 per unit of volatility. If you would invest  4,163,400  in Mini Dow Jones on September 1, 2024 and sell it today you would earn a total of  342,100  from holding Mini Dow Jones or generate 8.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Soybean Futures  vs.  Mini Dow Jones

Soybean Futures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soybean Futures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Soybean Futures is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Mini Dow Jones

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mini Dow Jones are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Mini Dow may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Soybean Futures and Mini Dow

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

The idea behind Soybean Futures and Mini Dow Jones 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.