Correlation Between 30 Year and Brent Crude
Can any of the company-specific risk be diversified away by investing in both 30 Year 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 30 Year and Brent Crude into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 30 Year Treasury and Brent Crude Oil, you can compare the effects of market volatilities on 30 Year 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 30 Year with a short position of Brent Crude. Check out your portfolio center. Please also check ongoing floating volatility patterns of 30 Year and Brent Crude.
Diversification Opportunities for 30 Year and Brent Crude
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between ZBUSD and Brent is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding 30 Year Treasury 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 30 Year 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 30 Year Treasury 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 30 Year i.e., 30 Year and Brent Crude go up and down completely randomly.
Pair Corralation between 30 Year and Brent Crude
Assuming the 90 days horizon 30 Year Treasury is expected to under-perform the Brent Crude. But the commodity apears to be less risky and, when comparing its historical volatility, 30 Year Treasury is 2.36 times less risky than Brent Crude. The commodity trades about -0.04 of its potential returns per unit of risk. The Brent Crude Oil is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 7,250 in Brent Crude Oil on August 26, 2024 and sell it today you would earn a total of 209.00 from holding Brent Crude Oil or generate 2.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
30 Year Treasury vs. Brent Crude Oil
Performance |
| Timeline |
| 30 Year Treasury |
| Brent Crude Oil |
30 Year and Brent Crude Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 30 Year and Brent Crude
The main advantage of trading using opposite 30 Year and Brent Crude positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 30 Year 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.| 30 Year vs. Corn Futures | 30 Year vs. Silver Futures | 30 Year vs. Orange Juice | 30 Year vs. Brent Crude Oil |
| Brent Crude vs. Micro Silver Futures | Brent Crude vs. 30 Day Fed | Brent Crude vs. Mini Dow Jones | Brent Crude vs. Gasoline RBOB |
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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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