Correlation Between Crude Oil and Oat Futures
Can any of the company-specific risk be diversified away by investing in both Crude Oil and Oat 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 Oat 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 Oat Futures, you can compare the effects of market volatilities on Crude Oil and Oat 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 Oat Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crude Oil and Oat Futures.
Diversification Opportunities for Crude Oil and Oat Futures
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Crude and Oat is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Crude Oil and Oat Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oat 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 Oat Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oat Futures has no effect on the direction of Crude Oil i.e., Crude Oil and Oat Futures go up and down completely randomly.
Pair Corralation between Crude Oil and Oat Futures
Assuming the 90 days horizon Crude Oil is expected to under-perform the Oat Futures. But the commodity apears to be less risky and, when comparing its historical volatility, Crude Oil is 1.18 times less risky than Oat Futures. The commodity trades about 0.0 of its potential returns per unit of risk. The Oat Futures is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 36,125 in Oat Futures on September 3, 2024 and sell it today you would lose (2,375) from holding Oat Futures or give up 6.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.4% |
| Values | Daily Returns |
Crude Oil vs. Oat Futures
Performance |
| Timeline |
| Crude Oil |
| Oat Futures |
Crude Oil and Oat Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crude Oil and Oat Futures
The main advantage of trading using opposite Crude Oil and Oat Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crude Oil position performs unexpectedly, Oat 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 Oat Futures will offset losses from the drop in Oat Futures' long position.| Crude Oil vs. E Mini SP 500 | Crude Oil vs. 30 Year Treasury | Crude Oil vs. 2 Year T Note Futures | Crude Oil vs. Heating Oil |
| Oat Futures vs. Heating Oil | Oat Futures vs. Crude Oil | Oat Futures vs. Aluminum Futures | Oat Futures vs. Corn 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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