Correlation Between Gasoline RBOB and Wheat Futures
Can any of the company-specific risk be diversified away by investing in both Gasoline RBOB and Wheat Futures 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 Wheat Futures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gasoline RBOB and Wheat Futures, you can compare the effects of market volatilities on Gasoline RBOB and Wheat Futures 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 Wheat Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gasoline RBOB and Wheat Futures.
Diversification Opportunities for Gasoline RBOB and Wheat Futures
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Gasoline and Wheat is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Gasoline RBOB and Wheat Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheat 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 Wheat Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheat Futures has no effect on the direction of Gasoline RBOB i.e., Gasoline RBOB and Wheat Futures go up and down completely randomly.
Pair Corralation between Gasoline RBOB and Wheat Futures
Assuming the 90 days horizon Gasoline RBOB is expected to generate 1.2 times more return on investment than Wheat Futures. However, Gasoline RBOB is 1.2 times more volatile than Wheat Futures. It trades about -0.02 of its potential returns per unit of risk. Wheat Futures is currently generating about -0.02 per unit of risk. If you would invest 219.00 in Gasoline RBOB on August 29, 2024 and sell it today you would lose (24.00) from holding Gasoline RBOB or give up 10.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.6% |
| Values | Daily Returns |
Gasoline RBOB vs. Wheat Futures
Performance |
| Timeline |
| Gasoline RBOB |
| Wheat Futures |
Gasoline RBOB and Wheat Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gasoline RBOB and Wheat Futures
The main advantage of trading using opposite Gasoline RBOB and Wheat Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gasoline RBOB position performs unexpectedly, Wheat Futures 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 Wheat Futures will offset losses from the drop in Wheat Futures' long position.| Gasoline RBOB vs. Mini Dow Jones | Gasoline RBOB vs. Rough Rice Futures | Gasoline RBOB vs. Platinum | Gasoline RBOB vs. Soybean Futures |
| Wheat Futures vs. Cotton | Wheat Futures vs. US Dollar | Wheat Futures vs. Palladium | Wheat Futures vs. Lumber 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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