Correlation Between Aluminum Futures and Brent Crude
Can any of the company-specific risk be diversified away by investing in both Aluminum Futures and Brent Crude 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 Aluminum Futures and Brent Crude into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum Futures and Brent Crude Oil, you can compare the effects of market volatilities on Aluminum Futures and Brent Crude 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 Aluminum Futures with a short position of Brent Crude. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminum Futures and Brent Crude.
Diversification Opportunities for Aluminum Futures and Brent Crude
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Aluminum and Brent is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum Futures and Brent Crude Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brent Crude Oil and Aluminum 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 Aluminum Futures are associated (or correlated) with Brent Crude. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brent Crude Oil has no effect on the direction of Aluminum Futures i.e., Aluminum Futures and Brent Crude go up and down completely randomly.
Pair Corralation between Aluminum Futures and Brent Crude
Assuming the 90 days trading horizon Aluminum Futures is expected to generate 0.73 times more return on investment than Brent Crude. However, Aluminum Futures is 1.36 times less risky than Brent Crude. It trades about 0.01 of its potential returns per unit of risk. Brent Crude Oil is currently generating about 0.0 per unit of risk. If you would invest 259,500 in Aluminum Futures on October 21, 2024 and sell it today you would earn a total of 9,925 from holding Aluminum Futures or generate 3.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aluminum Futures vs. Brent Crude Oil
Performance |
| Timeline |
| Aluminum Futures |
| Brent Crude Oil |
Aluminum Futures and Brent Crude Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminum Futures and Brent Crude
The main advantage of trading using opposite Aluminum Futures and Brent Crude positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminum Futures position performs unexpectedly, Brent Crude 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 Brent Crude will offset losses from the drop in Brent Crude's long position.| Aluminum Futures vs. Crude Oil | Aluminum Futures vs. Brent Crude Oil | Aluminum Futures vs. US Dollar | Aluminum Futures vs. Cocoa |
| Brent Crude vs. Palladium | Brent Crude vs. 30 Year Treasury | Brent Crude vs. Aluminum Futures | Brent Crude vs. Class III Milk |
Check out your portfolio center.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 CEOs Directory module to screen CEOs from public companies around the world.
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