Correlation Between Brent Crude and First Pacific
Can any of the company-specific risk be diversified away by investing in both Brent Crude and First Pacific 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 Brent Crude and First Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brent Crude Oil and First Pacific, you can compare the effects of market volatilities on Brent Crude and First Pacific 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 Brent Crude with a short position of First Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brent Crude and First Pacific.
Diversification Opportunities for Brent Crude and First Pacific
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Brent and First is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Brent Crude Oil and First Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Pacific and Brent Crude 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 Brent Crude Oil are associated (or correlated) with First Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Pacific has no effect on the direction of Brent Crude i.e., Brent Crude and First Pacific go up and down completely randomly.
Pair Corralation between Brent Crude and First Pacific
Assuming the 90 days horizon Brent Crude is expected to generate 166.95 times less return on investment than First Pacific. But when comparing it to its historical volatility, Brent Crude Oil is 6.13 times less risky than First Pacific. It trades about 0.0 of its potential returns per unit of risk. First Pacific is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 36.00 in First Pacific on October 21, 2024 and sell it today you would earn a total of 18.00 from holding First Pacific or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 92.56% |
| Values | Daily Returns |
Brent Crude Oil vs. First Pacific
Performance |
| Timeline |
| Brent Crude Oil |
| First Pacific |
Brent Crude and First Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brent Crude and First Pacific
The main advantage of trading using opposite Brent Crude and First Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brent Crude position performs unexpectedly, First Pacific 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 First Pacific will offset losses from the drop in First Pacific's long position.| Brent Crude vs. Palladium | Brent Crude vs. 30 Year Treasury | Brent Crude vs. Aluminum Futures | Brent Crude vs. Class III Milk |
| First Pacific vs. BRF SA ADR | First Pacific vs. Flowers Foods | First Pacific vs. Premier Foods Plc | First Pacific vs. Torque Lifestyle Brands |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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