Correlation Between 30 Day and Gasoline RBOB
Can any of the company-specific risk be diversified away by investing in both 30 Day 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 30 Day and Gasoline RBOB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 30 Day Fed and Gasoline RBOB, you can compare the effects of market volatilities on 30 Day 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 30 Day with a short position of Gasoline RBOB. Check out your portfolio center. Please also check ongoing floating volatility patterns of 30 Day and Gasoline RBOB.
Diversification Opportunities for 30 Day and Gasoline RBOB
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between ZQUSD and Gasoline is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding 30 Day Fed and Gasoline RBOB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gasoline RBOB and 30 Day 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 Day Fed 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 30 Day i.e., 30 Day and Gasoline RBOB go up and down completely randomly.
Pair Corralation between 30 Day and Gasoline RBOB
Assuming the 90 days horizon 30 Day Fed is expected to generate 0.04 times more return on investment than Gasoline RBOB. However, 30 Day Fed is 25.31 times less risky than Gasoline RBOB. It trades about 0.07 of its potential returns per unit of risk. Gasoline RBOB is currently generating about -0.07 per unit of risk. If you would invest 9,467 in 30 Day Fed on August 25, 2024 and sell it today you would earn a total of 80.00 from holding 30 Day Fed or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
30 Day Fed vs. Gasoline RBOB
Performance |
| Timeline |
| 30 Day Fed |
| Gasoline RBOB |
30 Day and Gasoline RBOB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 30 Day and Gasoline RBOB
The main advantage of trading using opposite 30 Day and Gasoline RBOB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 30 Day 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.The idea behind 30 Day Fed and Gasoline RBOB 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.| 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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