Correlation Between Rough Rice and Heating Oil
Can any of the company-specific risk be diversified away by investing in both Rough Rice and Heating Oil 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 Rough Rice and Heating Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rough Rice Futures and Heating Oil, you can compare the effects of market volatilities on Rough Rice and Heating Oil 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 Rough Rice with a short position of Heating Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rough Rice and Heating Oil.
Diversification Opportunities for Rough Rice and Heating Oil
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rough and Heating is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Rough Rice Futures and Heating Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heating Oil and Rough Rice 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 Rough Rice Futures are associated (or correlated) with Heating Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heating Oil has no effect on the direction of Rough Rice i.e., Rough Rice and Heating Oil go up and down completely randomly.
Pair Corralation between Rough Rice and Heating Oil
Assuming the 90 days horizon Rough Rice Futures is expected to under-perform the Heating Oil. But the commodity apears to be less risky and, when comparing its historical volatility, Rough Rice Futures is 2.29 times less risky than Heating Oil. The commodity trades about -0.13 of its potential returns per unit of risk. The Heating Oil is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 226.00 in Heating Oil on September 18, 2024 and sell it today you would lose (2.00) from holding Heating Oil or give up 0.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Rough Rice Futures vs. Heating Oil
Performance |
| Timeline |
| Rough Rice Futures |
| Heating Oil |
Rough Rice and Heating Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rough Rice and Heating Oil
The main advantage of trading using opposite Rough Rice and Heating Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rough Rice position performs unexpectedly, Heating Oil 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 Heating Oil will offset losses from the drop in Heating Oil's long position.| Rough Rice vs. Corn Futures | Rough Rice vs. Silver Futures | Rough Rice vs. Orange Juice | Rough Rice vs. Brent Crude Oil |
| Heating Oil vs. Wheat Futures | Heating Oil vs. Mini Dow Jones | Heating Oil vs. Micro Gold Futures | Heating Oil vs. Nasdaq 100 |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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