Correlation Between Nasdaq 100 and Heating Oil
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Heating 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 Nasdaq 100 and Heating Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 and Heating Oil, you can compare the effects of market volatilities on Nasdaq 100 and Heating 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 Nasdaq 100 with a short position of Heating Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Heating Oil.
Diversification Opportunities for Nasdaq 100 and Heating Oil
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Nasdaq and Heating is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 and Heating Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heating Oil and Nasdaq 100 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 Nasdaq 100 are associated (or correlated) with Heating Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heating Oil has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Heating Oil go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Heating Oil
Assuming the 90 days horizon Nasdaq 100 is expected to generate 0.68 times more return on investment than Heating Oil. However, Nasdaq 100 is 1.47 times less risky than Heating Oil. It trades about 0.07 of its potential returns per unit of risk. Heating Oil is currently generating about -0.02 per unit of risk. If you would invest 1,895,075 in Nasdaq 100 on August 25, 2024 and sell it today you would earn a total of 190,850 from holding Nasdaq 100 or generate 10.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 vs. Heating Oil
Performance |
| Timeline |
| Nasdaq 100 |
| Heating Oil |
Nasdaq 100 and Heating Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Heating Oil
The main advantage of trading using opposite Nasdaq 100 and Heating Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Heating 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 Heating Oil will offset losses from the drop in Heating Oil's long position.| Nasdaq 100 vs. Soybean Futures | Nasdaq 100 vs. Palladium | Nasdaq 100 vs. Brent Crude Oil | Nasdaq 100 vs. Lean Hogs Futures |
| Heating Oil vs. 10 Year T Note Futures | Heating Oil vs. Nasdaq 100 | Heating Oil vs. Oat Futures | Heating Oil vs. Wheat 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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