Weather and Trading
Weather trading involves using financial instruments known as weather derivatives to hedge against the financial risks associated with adverse weather conditions. These derivatives allow companies and individuals to manage risks related to temperature, rainfall, snowfall, and other weather factors that can impact their operations and revenues. For example, energy companies can use weather derivatives to mitigate risks related to varying temperatures, which affect demand for heating and cooling services.

Research has shown that weather conditions can significantly impact financial markets. For instance, a study published in ScienceDirect found that global index-level trading strategies based on daily weather conditions across 49 countries produced a mean annual return of 15.2% compared to a mean world index return of 6.2%(approximate).

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