Correlation Between Silver Futures and Brent Crude
Can any of the company-specific risk be diversified away by investing in both Silver Futures 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 Silver Futures and Brent Crude into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silver Futures and Brent Crude Oil, you can compare the effects of market volatilities on Silver Futures 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 Silver Futures with a short position of Brent Crude. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silver Futures and Brent Crude.
Diversification Opportunities for Silver Futures and Brent Crude
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Silver and Brent is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Silver Futures 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 Silver Futures 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 Silver Futures 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 Silver Futures i.e., Silver Futures and Brent Crude go up and down completely randomly.
Pair Corralation between Silver Futures and Brent Crude
Assuming the 90 days horizon Silver Futures is expected to generate 1.18 times more return on investment than Brent Crude. However, Silver Futures is 1.18 times more volatile than Brent Crude Oil. It trades about 0.17 of its potential returns per unit of risk. Brent Crude Oil is currently generating about -0.1 per unit of risk. If you would invest 3,069 in Silver Futures on November 8, 2024 and sell it today you would earn a total of 196.00 from holding Silver Futures or generate 6.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Silver Futures vs. Brent Crude Oil
Performance |
| Timeline |
| Silver Futures |
| Brent Crude Oil |
Silver Futures and Brent Crude Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silver Futures and Brent Crude
The main advantage of trading using opposite Silver Futures and Brent Crude positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silver Futures 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.| Silver Futures vs. Cocoa | Silver Futures vs. Brent Crude Oil | Silver Futures vs. Platinum | Silver Futures vs. Corn Futures |
| Brent Crude vs. 2 Year T Note Futures | Brent Crude vs. Micro E mini Russell | Brent Crude vs. Cocoa | Brent Crude vs. Lean Hogs 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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