Correlation Between Gasoline RBOB and Soybean Futures
Can any of the company-specific risk be diversified away by investing in both Gasoline RBOB and Soybean 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 Soybean 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 Soybean Futures, you can compare the effects of market volatilities on Gasoline RBOB and Soybean 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 Soybean Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gasoline RBOB and Soybean Futures.
Diversification Opportunities for Gasoline RBOB and Soybean Futures
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Gasoline and Soybean is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Gasoline RBOB and Soybean Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soybean 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 Soybean Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soybean Futures has no effect on the direction of Gasoline RBOB i.e., Gasoline RBOB and Soybean Futures go up and down completely randomly.
Pair Corralation between Gasoline RBOB and Soybean Futures
Assuming the 90 days horizon Gasoline RBOB is expected to generate 1.87 times more return on investment than Soybean Futures. However, Gasoline RBOB is 1.87 times more volatile than Soybean Futures. It trades about -0.01 of its potential returns per unit of risk. Soybean Futures is currently generating about -0.07 per unit of risk. If you would invest 220.00 in Gasoline RBOB on August 29, 2024 and sell it today you would lose (27.00) from holding Gasoline RBOB or give up 12.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 98.32% |
| Values | Daily Returns |
Gasoline RBOB vs. Soybean Futures
Performance |
| Timeline |
| Gasoline RBOB |
| Soybean Futures |
Gasoline RBOB and Soybean Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gasoline RBOB and Soybean Futures
The main advantage of trading using opposite Gasoline RBOB and Soybean Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gasoline RBOB position performs unexpectedly, Soybean 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 Soybean Futures will offset losses from the drop in Soybean Futures' long position.| Gasoline RBOB vs. Mini Dow Jones | Gasoline RBOB vs. Rough Rice Futures | Gasoline RBOB vs. Platinum | Gasoline RBOB vs. Soybean Futures |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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