Correlation Between Orange Juice and Gasoline RBOB
Can any of the company-specific risk be diversified away by investing in both Orange Juice and Gasoline RBOB 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 Orange Juice and Gasoline RBOB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orange Juice and Gasoline RBOB, you can compare the effects of market volatilities on Orange Juice and Gasoline RBOB 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 Orange Juice with a short position of Gasoline RBOB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orange Juice and Gasoline RBOB.
Diversification Opportunities for Orange Juice and Gasoline RBOB
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Orange and Gasoline is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Orange Juice and Gasoline RBOB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gasoline RBOB and Orange Juice 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 Orange Juice are associated (or correlated) with Gasoline RBOB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gasoline RBOB has no effect on the direction of Orange Juice i.e., Orange Juice and Gasoline RBOB go up and down completely randomly.
Pair Corralation between Orange Juice and Gasoline RBOB
Assuming the 90 days horizon Orange Juice is expected to generate 1.37 times more return on investment than Gasoline RBOB. However, Orange Juice is 1.37 times more volatile than Gasoline RBOB. It trades about 0.02 of its potential returns per unit of risk. Gasoline RBOB is currently generating about -0.08 per unit of risk. If you would invest 48,720 in Orange Juice on August 26, 2024 and sell it today you would earn a total of 1,830 from holding Orange Juice or generate 3.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.69% |
| Values | Daily Returns |
Orange Juice vs. Gasoline RBOB
Performance |
| Timeline |
| Orange Juice |
| Gasoline RBOB |
Orange Juice and Gasoline RBOB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orange Juice and Gasoline RBOB
The main advantage of trading using opposite Orange Juice and Gasoline RBOB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orange Juice position performs unexpectedly, Gasoline RBOB 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 Gasoline RBOB will offset losses from the drop in Gasoline RBOB's long position.| Orange Juice vs. Brent Crude Oil | Orange Juice vs. Natural Gas | Orange Juice vs. Five Year Treasury Note | Orange Juice vs. Micro Gold Futures |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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