Correlation Between Brent Crude and Soybean Futures
Can any of the company-specific risk be diversified away by investing in both Brent Crude and Soybean Futures 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 Soybean Futures 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 Soybean Futures, you can compare the effects of market volatilities on Brent Crude and Soybean Futures 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 Soybean Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brent Crude and Soybean Futures.
Diversification Opportunities for Brent Crude and Soybean Futures
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Brent and Soybean is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Brent Crude Oil and Soybean Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soybean 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 Soybean Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soybean Futures has no effect on the direction of Brent Crude i.e., Brent Crude and Soybean Futures go up and down completely randomly.
Pair Corralation between Brent Crude and Soybean Futures
Assuming the 90 days horizon Brent Crude Oil is expected to generate 1.18 times more return on investment than Soybean Futures. However, Brent Crude is 1.18 times more volatile than Soybean Futures. It trades about 0.0 of its potential returns per unit of risk. Soybean Futures is currently generating about -0.04 per unit of risk. If you would invest 8,268 in Brent Crude Oil on August 25, 2024 and sell it today you would lose (809.00) from holding Brent Crude Oil or give up 9.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.82% |
| Values | Daily Returns |
Brent Crude Oil vs. Soybean Futures
Performance |
| Timeline |
| Brent Crude Oil |
| Soybean Futures |
Brent Crude and Soybean Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brent Crude and Soybean Futures
The main advantage of trading using opposite Brent Crude and Soybean Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brent Crude position performs unexpectedly, Soybean Futures 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 Soybean Futures will offset losses from the drop in Soybean Futures' long position.| Brent Crude vs. Micro Silver Futures | Brent Crude vs. 30 Day Fed | Brent Crude vs. Mini Dow Jones | Brent Crude vs. Gasoline RBOB |
| Soybean Futures vs. Crude Oil | Soybean Futures vs. Brent Crude Oil | Soybean Futures vs. E Mini SP 500 | Soybean Futures vs. 30 Year Treasury |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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