Correlation Between Gasoline RBOB and Palladium
Can any of the company-specific risk be diversified away by investing in both Gasoline RBOB and Palladium 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 Palladium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gasoline RBOB and Palladium, you can compare the effects of market volatilities on Gasoline RBOB and Palladium 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 Palladium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gasoline RBOB and Palladium.
Diversification Opportunities for Gasoline RBOB and Palladium
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gasoline and Palladium is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Gasoline RBOB and Palladium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palladium 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 Palladium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palladium has no effect on the direction of Gasoline RBOB i.e., Gasoline RBOB and Palladium go up and down completely randomly.
Pair Corralation between Gasoline RBOB and Palladium
Assuming the 90 days horizon Gasoline RBOB is expected to generate 0.47 times more return on investment than Palladium. However, Gasoline RBOB is 2.13 times less risky than Palladium. It trades about 0.15 of its potential returns per unit of risk. Palladium is currently generating about -0.28 per unit of risk. If you would invest 193.00 in Gasoline RBOB on August 27, 2024 and sell it today you would earn a total of 8.00 from holding Gasoline RBOB or generate 4.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gasoline RBOB vs. Palladium
Performance |
| Timeline |
| Gasoline RBOB |
| Palladium |
Gasoline RBOB and Palladium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gasoline RBOB and Palladium
The main advantage of trading using opposite Gasoline RBOB and Palladium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gasoline RBOB position performs unexpectedly, Palladium 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 Palladium will offset losses from the drop in Palladium's long position.| Gasoline RBOB vs. Corn Futures | Gasoline RBOB vs. Aluminum Futures | Gasoline RBOB vs. 30 Day Fed | Gasoline RBOB vs. Lean Hogs Futures |
| Palladium vs. Natural Gas | Palladium vs. Nasdaq 100 | Palladium vs. Gasoline RBOB | Palladium 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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