Correlation Between Crude Oil and E Mini
Can any of the company-specific risk be diversified away by investing in both Crude Oil and E Mini 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 E Mini into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crude Oil and E Mini SP 500, you can compare the effects of market volatilities on Crude Oil and E Mini 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 E Mini. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crude Oil and E Mini.
Diversification Opportunities for Crude Oil and E Mini
Good diversification
The 3 months correlation between Crude and ESUSD is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Crude Oil and E Mini SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Mini SP 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 E Mini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Mini SP has no effect on the direction of Crude Oil i.e., Crude Oil and E Mini go up and down completely randomly.
Pair Corralation between Crude Oil and E Mini
Assuming the 90 days horizon Crude Oil is expected to under-perform the E Mini. In addition to that, Crude Oil is 2.45 times more volatile than E Mini SP 500. It trades about -0.02 of its total potential returns per unit of risk. E Mini SP 500 is currently generating about 0.11 per unit of volatility. If you would invest 453,775 in E Mini SP 500 on August 29, 2024 and sell it today you would earn a total of 147,725 from holding E Mini SP 500 or generate 32.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.82% |
| Values | Daily Returns |
Crude Oil vs. E Mini SP 500
Performance |
| Timeline |
| Crude Oil |
| E Mini SP |
Crude Oil and E Mini Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crude Oil and E Mini
The main advantage of trading using opposite Crude Oil and E Mini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crude Oil position performs unexpectedly, E Mini 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 E Mini will offset losses from the drop in E Mini's long position.| Crude Oil vs. Palladium | Crude Oil vs. Brent Crude Oil | Crude Oil vs. Natural Gas | Crude Oil vs. Live Cattle 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |