Correlation Between Brent Crude and Micro Gold
Can any of the company-specific risk be diversified away by investing in both Brent Crude and Micro Gold 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 Micro Gold 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 Micro Gold Futures, you can compare the effects of market volatilities on Brent Crude and Micro Gold 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 Micro Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brent Crude and Micro Gold.
Diversification Opportunities for Brent Crude and Micro Gold
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Brent and Micro is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Brent Crude Oil and Micro Gold Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Gold Futures 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 Micro Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Gold Futures has no effect on the direction of Brent Crude i.e., Brent Crude and Micro Gold go up and down completely randomly.
Pair Corralation between Brent Crude and Micro Gold
Assuming the 90 days horizon Brent Crude Oil is expected to under-perform the Micro Gold. In addition to that, Brent Crude is 1.71 times more volatile than Micro Gold Futures. It trades about -0.02 of its total potential returns per unit of risk. Micro Gold Futures is currently generating about 0.11 per unit of volatility. If you would invest 204,000 in Micro Gold Futures on August 24, 2024 and sell it today you would earn a total of 63,180 from holding Micro Gold Futures or generate 30.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brent Crude Oil vs. Micro Gold Futures
Performance |
| Timeline |
| Brent Crude Oil |
| Micro Gold Futures |
Brent Crude and Micro Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brent Crude and Micro Gold
The main advantage of trading using opposite Brent Crude and Micro Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brent Crude position performs unexpectedly, Micro Gold 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 Micro Gold will offset losses from the drop in Micro Gold's long position.| Brent Crude vs. Lumber Futures | Brent Crude vs. Heating Oil | Brent Crude vs. Orange Juice | Brent Crude vs. Live Cattle Futures |
| Micro Gold vs. Brent Crude Oil | Micro Gold vs. Natural Gas | Micro Gold vs. Five Year Treasury Note | Micro Gold 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Stocks Directory Find actively traded stocks across global markets | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |