Correlation Between Teucrium Wheat and Teucrium Corn

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

By analyzing existing cross correlation between Teucrium Wheat and Teucrium Corn, you can compare the effects of market volatilities on Teucrium Wheat and Teucrium Corn 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 Teucrium Wheat with a short position of Teucrium Corn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teucrium Wheat and Teucrium Corn.

Diversification Opportunities for Teucrium Wheat and Teucrium Corn

0.46

Correlation Coefficient

Teucrium Wheat  Teucrium Corn

Very weak diversification

The 3 months correlation between Teucrium and Teucrium is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Teucrium Wheat and Teucrium Corn in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teucrium Corn and Teucrium Wheat 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 Teucrium Wheat are associated (or correlated) with Teucrium Corn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teucrium Corn has no effect on the direction of Teucrium Wheat i.e., Teucrium Wheat and Teucrium Corn go up and down completely randomly.

Pair Corralation between Teucrium Wheat and Teucrium Corn

Given the investment horizon of 90 days Teucrium Wheat is expected to under-perform the Teucrium Corn. In addition to that, Teucrium Wheat is 1.49 times more volatile than Teucrium Corn. It trades about -0.07 of its total potential returns per unit of risk. Teucrium Corn is currently generating about -0.02 per unit of volatility. If you would invest  1,796  in Teucrium Corn on August 31, 2024 and sell it today you would lose (22.00) from holding Teucrium Corn or give up 1.22% of portfolio value over 90 days.

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

Teucrium Wheat  vs.  Teucrium Corn

Teucrium Wheat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teucrium Wheat has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Teucrium Wheat is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Teucrium Corn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teucrium Corn has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Teucrium Corn is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Teucrium Wheat and Teucrium Corn

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

The idea behind Teucrium Wheat and Teucrium Corn 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.