Correlation Between Brent Crude and Nasdaq 100
Can any of the company-specific risk be diversified away by investing in both Brent Crude and Nasdaq 100 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 Nasdaq 100 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 Nasdaq 100, you can compare the effects of market volatilities on Brent Crude and Nasdaq 100 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 Nasdaq 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brent Crude and Nasdaq 100.
Diversification Opportunities for Brent Crude and Nasdaq 100
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Brent and Nasdaq is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Brent Crude Oil and Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 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 Nasdaq 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 has no effect on the direction of Brent Crude i.e., Brent Crude and Nasdaq 100 go up and down completely randomly.
Pair Corralation between Brent Crude and Nasdaq 100
Assuming the 90 days horizon Brent Crude Oil is expected to under-perform the Nasdaq 100. In addition to that, Brent Crude is 1.5 times more volatile than Nasdaq 100. It trades about -0.01 of its total potential returns per unit of risk. Nasdaq 100 is currently generating about 0.1 per unit of volatility. If you would invest 1,586,900 in Nasdaq 100 on August 29, 2024 and sell it today you would earn a total of 512,250 from holding Nasdaq 100 or generate 32.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.61% |
| Values | Daily Returns |
Brent Crude Oil vs. Nasdaq 100
Performance |
| Timeline |
| Brent Crude Oil |
| Nasdaq 100 |
Brent Crude and Nasdaq 100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brent Crude and Nasdaq 100
The main advantage of trading using opposite Brent Crude and Nasdaq 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brent Crude position performs unexpectedly, Nasdaq 100 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 Nasdaq 100 will offset losses from the drop in Nasdaq 100's long position.| Brent Crude vs. Soybean Futures | Brent Crude vs. E Mini SP 500 | Brent Crude vs. 30 Year Treasury | Brent Crude vs. 2 Year T Note Futures |
| Nasdaq 100 vs. Corn Futures | Nasdaq 100 vs. Five Year Treasury Note | Nasdaq 100 vs. Live Cattle Futures | Nasdaq 100 vs. Lean Hogs 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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