If you are unfamiliar with the basics of sugar futures, check out the last episode. In this episode, we will explore the correlations that sugar futures have with other products.
As mentioned in the previous episode, one would assume that the correlations between corn and sugar and gasoline and sugar would be high because of sugars increased usage in the ethanol market. When we take a look at the 1-month correlations and 6-month correlations, here’s what we see…
1 Month Sugar (/SB) Correlations
Corn (/ZC): +0.12
WTI Crude (/CL): +0.17
RBOB Gasoline (/RB): (-0.10)
6 Month Sugar (/SB) Correlations
Corn (/ZC): +0.2
WTI Crude (/CL): +0.08
RBOB Gasoline (/RB): -(0.03)
Overall, we really do not see much of a correlation between these products. What if we looked at all grain product correlations and sugar’s correlation to the US dollar instead of oil/gas?
6 Month Sugar (/SB) Correlations
Corn (/ZC): +0.2
Wheat (/ZX): +0.21
Soybeans (/ZS): +0.2
Sugar To Dollar Index Correlations
1 Month: -(0.37)
3 Month: +0.14
6 Month: -(0.28)
Again, we don’t see too strong of correlations across the board. The strongest correlation between all of these products is the negative correlation of sugar to the USD. Although if you look at a 24 month rolling correlation, this correlation has been positive in the past 2 years.
The 24 month rolling average of crude oil to sugar has been relatively low. When we look at a rolling 24 month average of RBOB gas to sugar, we can see that it has been much higher in the past, this could present a possible trade. We look at that potential trade in the next episode.
Strategies: N/A
Products Discussed In This Episode: /SB
*Values subject to change based on where the market is at
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