Correlation Between Crude Oil and 2 Year
Can any of the company-specific risk be diversified away by investing in both Crude Oil and 2 Year 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 2 Year into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crude Oil and 2 Year T Note Futures, you can compare the effects of market volatilities on Crude Oil and 2 Year 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 2 Year. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crude Oil and 2 Year.
Diversification Opportunities for Crude Oil and 2 Year
Very good diversification
The 3 months correlation between Crude and ZTUSD is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Crude Oil and 2 Year T Note Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2 Year T 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 2 Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2 Year T has no effect on the direction of Crude Oil i.e., Crude Oil and 2 Year go up and down completely randomly.
Pair Corralation between Crude Oil and 2 Year
Assuming the 90 days horizon Crude Oil is expected to generate 19.39 times more return on investment than 2 Year. However, Crude Oil is 19.39 times more volatile than 2 Year T Note Futures. It trades about 0.02 of its potential returns per unit of risk. 2 Year T Note Futures is currently generating about 0.04 per unit of risk. If you would invest 7,313 in Crude Oil on November 3, 2024 and sell it today you would earn a total of 31.00 from holding Crude Oil or generate 0.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Crude Oil vs. 2 Year T Note Futures
Performance |
| Timeline |
| Crude Oil |
| 2 Year T |
Crude Oil and 2 Year Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crude Oil and 2 Year
The main advantage of trading using opposite Crude Oil and 2 Year positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crude Oil position performs unexpectedly, 2 Year 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 2 Year will offset losses from the drop in 2 Year's 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 |
| 2 Year vs. Class III Milk | 2 Year vs. Live Cattle Futures | 2 Year vs. Heating Oil | 2 Year 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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