Correlation Between Micro Gold and Crude Oil
Can any of the company-specific risk be diversified away by investing in both Micro Gold and Crude Oil 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 Micro Gold and Crude Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micro Gold Futures and Crude Oil, you can compare the effects of market volatilities on Micro Gold and Crude Oil 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 Micro Gold with a short position of Crude Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micro Gold and Crude Oil.
Diversification Opportunities for Micro Gold and Crude Oil
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Micro and Crude is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Micro Gold Futures and Crude Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crude Oil and Micro Gold 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 Micro Gold Futures are associated (or correlated) with Crude Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crude Oil has no effect on the direction of Micro Gold i.e., Micro Gold and Crude Oil go up and down completely randomly.
Pair Corralation between Micro Gold and Crude Oil
Assuming the 90 days trading horizon Micro Gold Futures is expected to generate 0.52 times more return on investment than Crude Oil. However, Micro Gold Futures is 1.92 times less risky than Crude Oil. It trades about 0.11 of its potential returns per unit of risk. Crude Oil is currently generating about -0.01 per unit of risk. If you would invest 206,710 in Micro Gold Futures on August 25, 2024 and sell it today you would earn a total of 64,270 from holding Micro Gold Futures or generate 31.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.83% |
| Values | Daily Returns |
Micro Gold Futures vs. Crude Oil
Performance |
| Timeline |
| Micro Gold Futures |
| Crude Oil |
Micro Gold and Crude Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micro Gold and Crude Oil
The main advantage of trading using opposite Micro Gold and Crude Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micro Gold position performs unexpectedly, Crude Oil 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 Crude Oil will offset losses from the drop in Crude Oil's long position.| Micro Gold vs. Class III Milk | Micro Gold vs. Five Year Treasury Note | Micro Gold vs. Orange Juice | Micro Gold vs. Brent Crude Oil |
| Crude Oil vs. Soybean Meal Futures | Crude Oil vs. Coffee | Crude Oil vs. Sugar | Crude Oil vs. 10 Year T Note 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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