Correlation Between Crude Oil and Aluminum Futures
Can any of the company-specific risk be diversified away by investing in both Crude Oil and Aluminum 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 Crude Oil and Aluminum Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crude Oil and Aluminum Futures, you can compare the effects of market volatilities on Crude Oil and Aluminum 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 Crude Oil with a short position of Aluminum Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crude Oil and Aluminum Futures.
Diversification Opportunities for Crude Oil and Aluminum Futures
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Crude and Aluminum is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Crude Oil and Aluminum Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminum Futures and Crude Oil 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 Crude Oil are associated (or correlated) with Aluminum Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminum Futures has no effect on the direction of Crude Oil i.e., Crude Oil and Aluminum Futures go up and down completely randomly.
Pair Corralation between Crude Oil and Aluminum Futures
Assuming the 90 days horizon Crude Oil is expected to generate 15.0 times less return on investment than Aluminum Futures. In addition to that, Crude Oil is 1.5 times more volatile than Aluminum Futures. It trades about 0.0 of its total potential returns per unit of risk. Aluminum Futures is currently generating about 0.02 per unit of volatility. If you would invest 238,900 in Aluminum Futures on November 2, 2024 and sell it today you would earn a total of 19,850 from holding Aluminum Futures or generate 8.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.43% |
| Values | Daily Returns |
Crude Oil vs. Aluminum Futures
Performance |
| Timeline |
| Crude Oil |
| Aluminum Futures |
Crude Oil and Aluminum Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crude Oil and Aluminum Futures
The main advantage of trading using opposite Crude Oil and Aluminum Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crude Oil position performs unexpectedly, Aluminum 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 Aluminum Futures will offset losses from the drop in Aluminum Futures' long position.| Crude Oil vs. 10 Year T Note Futures | Crude Oil vs. Nasdaq 100 | Crude Oil vs. Oat Futures | Crude Oil vs. Wheat Futures |
| Aluminum Futures vs. Crude Oil | Aluminum Futures vs. E Mini SP 500 | Aluminum Futures vs. US Dollar | Aluminum Futures vs. Palladium |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |