Correlation Between Gasoline RBOB and Class III

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Can any of the company-specific risk be diversified away by investing in both Gasoline RBOB and Class III 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 Gasoline RBOB and Class III into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gasoline RBOB and Class III Milk, you can compare the effects of market volatilities on Gasoline RBOB and Class III 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 Gasoline RBOB with a short position of Class III. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gasoline RBOB and Class III.

Diversification Opportunities for Gasoline RBOB and Class III

-0.04
  Correlation Coefficient

Good diversification

The 3 months correlation between Gasoline and Class is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Gasoline RBOB and Class III Milk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Class III Milk and Gasoline RBOB 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 Gasoline RBOB are associated (or correlated) with Class III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Class III Milk has no effect on the direction of Gasoline RBOB i.e., Gasoline RBOB and Class III go up and down completely randomly.

Pair Corralation between Gasoline RBOB and Class III

Assuming the 90 days horizon Gasoline RBOB is expected to generate 1.87 times less return on investment than Class III. In addition to that, Gasoline RBOB is 1.11 times more volatile than Class III Milk. It trades about 0.0 of its total potential returns per unit of risk. Class III Milk is currently generating about 0.01 per unit of volatility. If you would invest  2,041  in Class III Milk on August 26, 2024 and sell it today you would lose (54.00) from holding Class III Milk or give up 2.65% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy97.84%
ValuesDaily Returns

Gasoline RBOB  vs.  Class III Milk

 Performance 
       Timeline  
Gasoline RBOB 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Gasoline RBOB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Gasoline RBOB is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Class III Milk 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Class III Milk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Class III is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Gasoline RBOB and Class III Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gasoline RBOB and Class III

The main advantage of trading using opposite Gasoline RBOB and Class III positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gasoline RBOB position performs unexpectedly, Class III 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 Class III will offset losses from the drop in Class III's long position.
The idea behind Gasoline RBOB and Class III Milk pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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