Correlation Between Micro E and Brent Crude
Can any of the company-specific risk be diversified away by investing in both Micro E and Brent Crude 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 Micro E and Brent Crude into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micro E mini Russell and Brent Crude Oil, you can compare the effects of market volatilities on Micro E and Brent Crude 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 Micro E with a short position of Brent Crude. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micro E and Brent Crude.
Diversification Opportunities for Micro E and Brent Crude
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Micro and Brent is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Micro E mini Russell and Brent Crude Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brent Crude Oil and Micro E 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 Micro E mini Russell are associated (or correlated) with Brent Crude. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brent Crude Oil has no effect on the direction of Micro E i.e., Micro E and Brent Crude go up and down completely randomly.
Pair Corralation between Micro E and Brent Crude
Assuming the 90 days trading horizon Micro E mini Russell is expected to generate 0.62 times more return on investment than Brent Crude. However, Micro E mini Russell is 1.6 times less risky than Brent Crude. It trades about 0.12 of its potential returns per unit of risk. Brent Crude Oil is currently generating about 0.05 per unit of risk. If you would invest 224,980 in Micro E mini Russell on November 1, 2024 and sell it today you would earn a total of 5,110 from holding Micro E mini Russell or generate 2.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Micro E mini Russell vs. Brent Crude Oil
Performance |
| Timeline |
| Micro E mini |
| Brent Crude Oil |
Micro E and Brent Crude Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micro E and Brent Crude
The main advantage of trading using opposite Micro E and Brent Crude positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micro E position performs unexpectedly, Brent Crude 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 Brent Crude will offset losses from the drop in Brent Crude's long position.The idea behind Micro E mini Russell and Brent Crude Oil pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Brent Crude vs. Orange Juice | Brent Crude vs. Micro E mini Russell | Brent Crude vs. Silver Futures | Brent Crude vs. Micro Gold 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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