Correlation Between Brent Crude and Copper
Can any of the company-specific risk be diversified away by investing in both Brent Crude and Copper 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 Copper 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 Copper, you can compare the effects of market volatilities on Brent Crude and Copper 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 Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brent Crude and Copper.
Diversification Opportunities for Brent Crude and Copper
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Brent and Copper is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Brent Crude Oil and Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper 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 Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copper has no effect on the direction of Brent Crude i.e., Brent Crude and Copper go up and down completely randomly.
Pair Corralation between Brent Crude and Copper
Assuming the 90 days horizon Brent Crude Oil is expected to under-perform the Copper. In addition to that, Brent Crude is 1.37 times more volatile than Copper. It trades about 0.0 of its total potential returns per unit of risk. Copper is currently generating about 0.25 per unit of volatility. If you would invest 403.00 in Copper on November 3, 2024 and sell it today you would earn a total of 23.00 from holding Copper or generate 5.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brent Crude Oil vs. Copper
Performance |
| Timeline |
| Brent Crude Oil |
| Copper |
Brent Crude and Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brent Crude and Copper
The main advantage of trading using opposite Brent Crude and Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brent Crude position performs unexpectedly, Copper 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 Copper will offset losses from the drop in Copper's long position.| Brent Crude vs. Micro Gold Futures | Brent Crude vs. Live Cattle Futures | Brent Crude vs. Class III Milk | Brent Crude vs. Soybean Futures |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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