Correlation Between Heating Oil and Rough Rice
Can any of the company-specific risk be diversified away by investing in both Heating Oil and Rough Rice 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 Rough Rice into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heating Oil and Rough Rice Futures, you can compare the effects of market volatilities on Heating Oil and Rough Rice 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 Rough Rice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heating Oil and Rough Rice.
Diversification Opportunities for Heating Oil and Rough Rice
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Heating and Rough is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Heating Oil and Rough Rice Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rough Rice Futures 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 Rough Rice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rough Rice Futures has no effect on the direction of Heating Oil i.e., Heating Oil and Rough Rice go up and down completely randomly.
Pair Corralation between Heating Oil and Rough Rice
Assuming the 90 days horizon Heating Oil is expected to generate 0.82 times more return on investment than Rough Rice. However, Heating Oil is 1.23 times less risky than Rough Rice. It trades about -0.02 of its potential returns per unit of risk. Rough Rice Futures is currently generating about -0.02 per unit of risk. If you would invest 255.00 in Heating Oil on August 25, 2024 and sell it today you would lose (27.00) from holding Heating Oil or give up 10.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.57% |
| Values | Daily Returns |
Heating Oil vs. Rough Rice Futures
Performance |
| Timeline |
| Heating Oil |
| Rough Rice Futures |
Heating Oil and Rough Rice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heating Oil and Rough Rice
The main advantage of trading using opposite Heating Oil and Rough Rice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heating Oil position performs unexpectedly, Rough Rice 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 Rough Rice will offset losses from the drop in Rough Rice's long position.| Heating Oil vs. 10 Year T Note Futures | Heating Oil vs. Nasdaq 100 | Heating Oil vs. Oat Futures | Heating Oil vs. Wheat Futures |
| Rough Rice vs. Heating Oil | Rough Rice vs. Crude Oil | Rough Rice vs. Aluminum Futures | Rough Rice 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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