Correlation Between Heating Oil and Nasdaq 100
Can any of the company-specific risk be diversified away by investing in both Heating Oil and Nasdaq 100 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 Heating Oil and Nasdaq 100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heating Oil and Nasdaq 100, you can compare the effects of market volatilities on Heating Oil and Nasdaq 100 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 Heating Oil with a short position of Nasdaq 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heating Oil and Nasdaq 100.
Diversification Opportunities for Heating Oil and Nasdaq 100
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Heating and Nasdaq is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Heating Oil and Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 and Heating 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 Heating Oil are associated (or correlated) with Nasdaq 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 has no effect on the direction of Heating Oil i.e., Heating Oil and Nasdaq 100 go up and down completely randomly.
Pair Corralation between Heating Oil and Nasdaq 100
Assuming the 90 days horizon Heating Oil is expected to under-perform the Nasdaq 100. In addition to that, Heating Oil is 1.61 times more volatile than Nasdaq 100. It trades about -0.05 of its total potential returns per unit of risk. Nasdaq 100 is currently generating about 0.11 per unit of volatility. If you would invest 1,523,250 in Nasdaq 100 on September 1, 2024 and sell it today you would earn a total of 576,100 from holding Nasdaq 100 or generate 37.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Heating Oil vs. Nasdaq 100
Performance |
| Timeline |
| Heating Oil |
| Nasdaq 100 |
Heating Oil and Nasdaq 100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heating Oil and Nasdaq 100
The main advantage of trading using opposite Heating Oil and Nasdaq 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heating Oil position performs unexpectedly, Nasdaq 100 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 Nasdaq 100 will offset losses from the drop in Nasdaq 100's long position.| Heating Oil vs. Live Cattle Futures | Heating Oil vs. Palladium | Heating Oil vs. 30 Year Treasury | Heating Oil vs. Silver Futures |
| Nasdaq 100 vs. Brent Crude Oil | Nasdaq 100 vs. Natural Gas | Nasdaq 100 vs. Five Year Treasury Note | Nasdaq 100 vs. Micro Gold 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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