Correlation Between Gasoline RBOB and Lean Hogs
Can any of the company-specific risk be diversified away by investing in both Gasoline RBOB and Lean Hogs 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 Lean Hogs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gasoline RBOB and Lean Hogs Futures, you can compare the effects of market volatilities on Gasoline RBOB and Lean Hogs 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 Lean Hogs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gasoline RBOB and Lean Hogs.
Diversification Opportunities for Gasoline RBOB and Lean Hogs
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gasoline and Lean is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Gasoline RBOB and Lean Hogs Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lean Hogs Futures 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 Lean Hogs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lean Hogs Futures has no effect on the direction of Gasoline RBOB i.e., Gasoline RBOB and Lean Hogs go up and down completely randomly.
Pair Corralation between Gasoline RBOB and Lean Hogs
Assuming the 90 days horizon Gasoline RBOB is expected to generate 1.13 times more return on investment than Lean Hogs. However, Gasoline RBOB is 1.13 times more volatile than Lean Hogs Futures. It trades about 0.36 of its potential returns per unit of risk. Lean Hogs Futures is currently generating about -0.17 per unit of risk. If you would invest 195.00 in Gasoline RBOB on October 22, 2024 and sell it today you would earn a total of 19.00 from holding Gasoline RBOB or generate 9.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Gasoline RBOB vs. Lean Hogs Futures
Performance |
| Timeline |
| Gasoline RBOB |
| Lean Hogs Futures |
Gasoline RBOB and Lean Hogs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gasoline RBOB and Lean Hogs
The main advantage of trading using opposite Gasoline RBOB and Lean Hogs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gasoline RBOB position performs unexpectedly, Lean Hogs 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 Lean Hogs will offset losses from the drop in Lean Hogs' long position.| Gasoline RBOB vs. Natural Gas | Gasoline RBOB vs. Live Cattle Futures | Gasoline RBOB vs. Palladium | Gasoline RBOB vs. Cotton |
| Lean Hogs vs. Crude Oil | Lean Hogs vs. Palladium | Lean Hogs vs. Gasoline RBOB | Lean Hogs vs. Rough Rice 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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