Correlation Between Corn Futures and Mini Dow

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

Diversification Opportunities for Corn Futures and Mini Dow

0.6

Correlation Coefficient

Corn Futures  Mini Dow

Poor diversification

The 3 months correlation between Corn and Mini is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Corn 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 Corn 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 Corn 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 Corn Futures i.e., Corn Futures and Mini Dow go up and down completely randomly.

Pair Corralation between Corn Futures and Mini Dow

Assuming the 90 days horizon Corn Futures is expected to generate 1.42 times more return on investment than Mini Dow. However, Corn Futures is 1.42 times more volatile than Mini Dow Jones. It trades about 0.13 of its potential returns per unit of risk. Mini Dow Jones is currently generating about 0.14 per unit of risk. If you would invest  41,325  in Corn Futures on September 13, 2024 and sell it today you would earn a total of  3,500  from holding Corn Futures or generate 8.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Corn Futures  vs.  Mini Dow Jones

Corn Futures

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corn Futures are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Corn Futures may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mini Dow Jones

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mini Dow Jones are ranked lower than 11 (%) 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 January 2025.

Pair Trading with Corn Futures and Mini Dow

The main advantage of trading using opposite Corn Futures and Mini Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corn 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 Corn 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.