Correlation Between Brent Crude and Sugar
Can any of the company-specific risk be diversified away by investing in both Brent Crude and Sugar 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 Sugar 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 Sugar, you can compare the effects of market volatilities on Brent Crude and Sugar 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 Sugar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brent Crude and Sugar.
Diversification Opportunities for Brent Crude and Sugar
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Brent and Sugar is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Brent Crude Oil and Sugar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sugar 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 Sugar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sugar has no effect on the direction of Brent Crude i.e., Brent Crude and Sugar go up and down completely randomly.
Pair Corralation between Brent Crude and Sugar
Assuming the 90 days horizon Brent Crude Oil is expected to under-perform the Sugar. But the commodity apears to be less risky and, when comparing its historical volatility, Brent Crude Oil is 1.02 times less risky than Sugar. The commodity trades about 0.0 of its potential returns per unit of risk. The Sugar is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,976 in Sugar on September 3, 2024 and sell it today you would earn a total of 132.00 from holding Sugar or generate 6.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.64% |
| Values | Daily Returns |
Brent Crude Oil vs. Sugar
Performance |
| Timeline |
| Brent Crude Oil |
| Sugar |
Brent Crude and Sugar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brent Crude and Sugar
The main advantage of trading using opposite Brent Crude and Sugar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brent Crude position performs unexpectedly, Sugar 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 Sugar will offset losses from the drop in Sugar's long position.| Brent Crude vs. Class III Milk | Brent Crude vs. Palladium | Brent Crude vs. Lean Hogs Futures | Brent Crude vs. Cotton |
| Sugar vs. Brent Crude Oil | Sugar vs. Natural Gas | Sugar vs. Five Year Treasury Note | Sugar vs. Micro Gold 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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