Correlation Between Gasoline RBOB and Sugar
Can any of the company-specific risk be diversified away by investing in both Gasoline RBOB and Sugar 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 Sugar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gasoline RBOB and Sugar, you can compare the effects of market volatilities on Gasoline RBOB and Sugar 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 Sugar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gasoline RBOB and Sugar.
Diversification Opportunities for Gasoline RBOB and Sugar
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Gasoline and Sugar is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Gasoline RBOB and Sugar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sugar 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 Sugar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sugar has no effect on the direction of Gasoline RBOB i.e., Gasoline RBOB and Sugar go up and down completely randomly.
Pair Corralation between Gasoline RBOB and Sugar
Assuming the 90 days horizon Gasoline RBOB is expected to under-perform the Sugar. In addition to that, Gasoline RBOB is 1.02 times more volatile than Sugar. It trades about -0.09 of its total potential returns per unit of risk. Sugar is currently generating about 0.08 per unit of volatility. If you would invest 1,830 in Sugar on August 29, 2024 and sell it today you would earn a total of 333.00 from holding Sugar or generate 18.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Gasoline RBOB vs. Sugar
Performance |
| Timeline |
| Gasoline RBOB |
| Sugar |
Gasoline RBOB and Sugar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gasoline RBOB and Sugar
The main advantage of trading using opposite Gasoline RBOB and Sugar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gasoline RBOB position performs unexpectedly, Sugar 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 Sugar will offset losses from the drop in Sugar'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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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