Correlation Between Mini Dow and Gasoline RBOB
Can any of the company-specific risk be diversified away by investing in both Mini Dow and Gasoline RBOB 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 Mini Dow and Gasoline RBOB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mini Dow Jones and Gasoline RBOB, you can compare the effects of market volatilities on Mini Dow and Gasoline RBOB 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 Mini Dow with a short position of Gasoline RBOB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mini Dow and Gasoline RBOB.
Diversification Opportunities for Mini Dow and Gasoline RBOB
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Mini and Gasoline is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Mini Dow Jones and Gasoline RBOB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gasoline RBOB and Mini Dow 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 Mini Dow Jones are associated (or correlated) with Gasoline RBOB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gasoline RBOB has no effect on the direction of Mini Dow i.e., Mini Dow and Gasoline RBOB go up and down completely randomly.
Pair Corralation between Mini Dow and Gasoline RBOB
Assuming the 90 days horizon Mini Dow Jones is expected to generate 0.34 times more return on investment than Gasoline RBOB. However, Mini Dow Jones is 2.93 times less risky than Gasoline RBOB. It trades about 0.12 of its potential returns per unit of risk. Gasoline RBOB is currently generating about -0.01 per unit of risk. If you would invest 3,626,800 in Mini Dow Jones on August 29, 2024 and sell it today you would earn a total of 872,900 from holding Mini Dow Jones or generate 24.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.61% |
| Values | Daily Returns |
Mini Dow Jones vs. Gasoline RBOB
Performance |
| Timeline |
| Mini Dow Jones |
| Gasoline RBOB |
Mini Dow and Gasoline RBOB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mini Dow and Gasoline RBOB
The main advantage of trading using opposite Mini Dow and Gasoline RBOB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mini Dow position performs unexpectedly, Gasoline RBOB 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 Gasoline RBOB will offset losses from the drop in Gasoline RBOB's long position.| Mini Dow vs. Live Cattle Futures | Mini Dow vs. US Dollar | Mini Dow vs. Micro E mini Russell | Mini Dow vs. Lumber Futures |
| 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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