Correlation Between Corn Futures and Gasoline RBOB
Can any of the company-specific risk be diversified away by investing in both Corn Futures 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 Corn Futures and Gasoline RBOB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Corn Futures and Gasoline RBOB, you can compare the effects of market volatilities on Corn Futures 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 Corn Futures with a short position of Gasoline RBOB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corn Futures and Gasoline RBOB.
Diversification Opportunities for Corn Futures and Gasoline RBOB
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Corn and Gasoline is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Corn Futures and Gasoline RBOB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gasoline RBOB and Corn 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 Corn Futures 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 Corn Futures i.e., Corn Futures and Gasoline RBOB go up and down completely randomly.
Pair Corralation between Corn Futures and Gasoline RBOB
Assuming the 90 days horizon Corn Futures is expected to under-perform the Gasoline RBOB. But the commodity apears to be less risky and, when comparing its historical volatility, Corn Futures is 1.52 times less risky than Gasoline RBOB. The commodity trades about -0.02 of its potential returns per unit of risk. The Gasoline RBOB is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 211.00 in Gasoline RBOB on August 25, 2024 and sell it today you would lose (10.00) from holding Gasoline RBOB or give up 4.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.57% |
| Values | Daily Returns |
Corn Futures vs. Gasoline RBOB
Performance |
| Timeline |
| Corn Futures |
| Gasoline RBOB |
Corn Futures and Gasoline RBOB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Corn Futures and Gasoline RBOB
The main advantage of trading using opposite Corn Futures and Gasoline RBOB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corn Futures 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.| Corn Futures vs. Oat Futures | Corn Futures vs. Wheat Futures | Corn Futures vs. Feeder Cattle Futures | Corn Futures vs. Micro Silver Futures |
| Gasoline RBOB vs. Crude Oil | Gasoline RBOB vs. Aluminum Futures | Gasoline RBOB vs. Corn Futures | Gasoline RBOB vs. Silver 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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