Correlation Between Gasoline RBOB and E Mini
Can any of the company-specific risk be diversified away by investing in both Gasoline RBOB and E Mini 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 E Mini into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gasoline RBOB and E Mini SP 500, you can compare the effects of market volatilities on Gasoline RBOB and E Mini 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 E Mini. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gasoline RBOB and E Mini.
Diversification Opportunities for Gasoline RBOB and E Mini
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Gasoline and ESUSD is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Gasoline RBOB and E Mini SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Mini SP 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 E Mini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Mini SP has no effect on the direction of Gasoline RBOB i.e., Gasoline RBOB and E Mini go up and down completely randomly.
Pair Corralation between Gasoline RBOB and E Mini
Assuming the 90 days horizon Gasoline RBOB is expected to generate 6.34 times less return on investment than E Mini. In addition to that, Gasoline RBOB is 2.76 times more volatile than E Mini SP 500. It trades about 0.01 of its total potential returns per unit of risk. E Mini SP 500 is currently generating about 0.1 per unit of volatility. If you would invest 396,575 in E Mini SP 500 on August 29, 2024 and sell it today you would earn a total of 204,925 from holding E Mini SP 500 or generate 51.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Gasoline RBOB vs. E Mini SP 500
Performance |
| Timeline |
| Gasoline RBOB |
| E Mini SP |
Gasoline RBOB and E Mini Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gasoline RBOB and E Mini
The main advantage of trading using opposite Gasoline RBOB and E Mini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gasoline RBOB position performs unexpectedly, E Mini 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 E Mini will offset losses from the drop in E Mini's long position.| Gasoline RBOB vs. Mini Dow Jones | Gasoline RBOB vs. Rough Rice Futures | Gasoline RBOB vs. Platinum | Gasoline RBOB vs. Soybean 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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