Brent Crude Oil Commodity Volatility
| BZUSD Commodity | 74.59 0.04 0.05% |
Brent Crude Oil secures Sharpe Ratio (or Efficiency) of -0.0447, which signifies that the commodity had a -0.0447% return per unit of standard deviation over the last 3 months. Brent Crude Oil exposes twenty-four different technical indicators, which can help you to evaluate volatility embedded in its price movement. Please confirm Brent Crude's mean deviation of 1.6, and Risk Adjusted Performance of (0.01) to double-check the risk estimate we provide.
Brent |
Brent Crude Commodity volatility depicts how high the prices fluctuate around the mean (or its average) price. In other words, it is a statistical measure of the distribution of Brent daily returns, and it is calculated using variance and standard deviation. We also use Brent's beta, its sensitivity to the market, as well as its odds of financial distress to provide a more practical estimation of Brent Crude volatility.
Downward market volatility can be a perfect environment for commodity traders who play the long game. For example, an investor can purchase Brent Crude Oil that has halved in price over a short period. This will lower the average cost, improving your portfolio's performance when the markets normalize. Similarly, when the prices of brent crude's commodities rise, investors can sell out and invest the proceeds in other commodities with better opportunities.
Moving against Brent Commodity
Brent Crude Market Sensitivity And Downside Risk
Brent Crude's beta coefficient measures the volatility of Brent commodity compared to the systematic risk of the entire market represented by your selected benchmark. In mathematical terms, beta represents the slope of the line through a regression of data points where each of these points represents Brent commodity's returns against your selected market. In other words, Brent Crude's beta of -0.25 provides an investor with an approximation of how much risk Brent Crude commodity can potentially add to one of your existing portfolios. Brent Crude Oil exhibits very low volatility with skewness of -0.35 and kurtosis of 0.41. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Brent Crude's commodity risk against market volatility during both bullish and bearish trends. The higher level of volatility that comes with bear markets can directly impact Brent Crude's commodity price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different financial instruments as prices fall.
3 Months Beta |Analyze Brent Crude Oil Demand TrendCheck current 90 days Brent Crude correlation with market (Dow Jones Industrial)Brent Beta |
Brent standard deviation measures the daily dispersion of prices over your selected time horizon relative to its mean. A typical volatile entity has a high standard deviation, while the deviation of a stable instrument is usually low. As a downside, the standard deviation calculates all uncertainty as risk, even when it is in your favor, such as above-average returns.
Standard Deviation | 2.05 |
It is essential to understand the difference between upside risk (as represented by Brent Crude's standard deviation) and the downside risk, which can be measured by semi-deviation or downside deviation of Brent Crude's daily returns or price. Since the actual investment returns on holding a position in brent commodity tend to have a non-normal distribution, there will be different probabilities for losses than for gains. The likelihood of losses is reflected in the downside risk of an investment in Brent Crude.
Brent Crude Oil Commodity Volatility Analysis
Volatility refers to the frequency at which Brent Crude commodity price increases or decreases within a specified period. These fluctuations usually indicate the level of risk that's associated with Brent Crude's price changes. Investors will then calculate the volatility of Brent Crude's commodity to predict their future moves. A commodity that has erratic price changes quickly hits new highs, and lows are considered highly volatile. A commodity with relatively stable price changes has low volatility. A highly volatile commodity is riskier, but the risk cuts both ways. Investing in highly volatile security can either be highly successful, or you may experience significant failure. There are two main types of Brent Crude's volatility:
Historical Volatility
This type of commodity volatility measures Brent Crude's fluctuations based on previous trends. It's commonly used to predict Brent Crude's future behavior based on its past. However, it cannot conclusively determine the future direction of the commodity.Implied Volatility
This type of volatility provides a positive outlook on future price fluctuations for Brent Crude's current market price. This means that the commodity will return to its initially predicted market price. This type of volatility can be derived from derivative instruments written on Brent Crude's to be redeemed at a future date.Transformation |
The output start index for this execution was zero with a total number of output elements of sixty-one. Brent Crude Oil Average Price is the average of the sum of open, high, low and close daily prices of a bar. It can be used to smooth an indicator that normally takes just the closing price as input.
Brent Crude Projected Return Density Against Market
Assuming the 90 days horizon Brent Crude Oil has a beta of -0.2458 suggesting as returns on the benchmark increase, returns on holding Brent Crude are expected to decrease at a much lower rate. During a bear market, however, Brent Crude Oil is likely to outperform the market.Most traded commodities, like Brent Crude, are exposed to two types of risk: systematic (i.e., market-wide) and unsystematic (i.e., specific to the commodities market). Unsystematic risk pertains to events directly impacting Brent Crude Oil prices. This risk can be mitigated by diversifying investments across various commodities from different sectors that have low correlation with each other. Conversely, systematic risk involves price fluctuations due to broader commodity market trends and cannot be eliminated through diversification. Regardless of the number of commodities in your portfolio, market-wide risks persist. However, you can assess Brent Crude's historical responsiveness to market shifts to gauge your comfort with its price volatility. Beta and standard deviation are key metrics to guide this analysis.
Brent Crude Oil has a negative alpha, implying that the risk taken by holding this instrument is not justified. The company is significantly underperforming the Dow Jones Industrial. Predicted Return Density |
| Returns |
What Drives a Brent Crude Price Volatility?
Several factors can influence a commodity's market volatility:Industry
Specific events can influence volatility within a particular industry. For instance, a significant weather upheaval in a crucial oil-production site may cause oil prices to increase in the oil sector. The direct result will be the rise in the price of oil distribution companies. Similarly, any government regulation in a specific industry could negatively influence prices due to increased presure on compliance that may impact the commodity's future earnings and growth.Political and Economic environment
When governments make significant decisions regarding trade agreements, policies, and legislation regarding specific industries, they will influence commodity prices. Everything from speeches to elections may influence investors, who can directly influence the prices in any particular industry.The Commodity's Performance
Sometimes volatility will only affect an individual commodity. For example, a revolutionary product launch or strong earnings report may attract many investors to purchase the commodity. This positive attention will raise the commodity's price.Brent Crude Commodity Risk Measures
Assuming the 90 days horizon the coefficient of variation of Brent Crude is -2235.78. The daily returns are distributed with a variance of 4.22 and standard deviation of 2.05. The mean deviation of Brent Crude Oil is currently at 1.56. For similar time horizon, the selected benchmark (Dow Jones Industrial) has volatility of 0.77
α | Alpha over Dow Jones | -0.03 | |
β | Beta against Dow Jones | -0.25 | |
σ | Overall volatility | 2.05 | |
Ir | Information ratio | -0.09 |
Brent Crude Commodity Return Volatility
Brent Crude historical daily return volatility represents how much of Brent Crude commodity's daily returns swing around its mean - it is a statistical measure of its dispersion of returns. Brent Crude Oil shows 2.0548% volatility of returns over 90 . By contrast, Dow Jones Industrial accepts 0.7626% volatility on return distribution over the 90 days horizon. Performance |
| Timeline |
Brent Crude Investment Opportunity
Brent Crude Oil has a volatility of 2.05 and is 2.7 times more volatile than Dow Jones Industrial. Compared to the overall equity markets, volatility of historical daily returns of Brent Crude Oil is lower than 18 percent of all global equities and portfolios over the last 90 days. You can use Brent Crude Oil to protect your portfolios against small market fluctuations. The commodity experiences a normal downward trend and little activity. Check odds of Brent Crude to be traded at 73.84 in 90 days.Good diversification
The correlation between Brent Crude Oil and DJI is -0.09 (i.e., Good diversification) for selected investment horizon. Overlapping area represents the amount of risk that can be diversified away by holding Brent Crude Oil and DJI in the same portfolio, assuming nothing else is changed.
Brent Crude Additional Risk Indicators
The analysis of Brent Crude's secondary risk indicators is one of the essential steps in making a buy or sell decision. The process involves identifying the amount of risk involved in Brent Crude's investment and either accepting that risk or mitigating it. Along with some common measures of Brent Crude commodity's risk such as standard deviation, beta, or value at risk, we also provide a set of secondary indicators that can assist in the individual investment decision or help in hedging the risk of your existing portfolios.
| Risk Adjusted Performance | (0.01) | |||
| Market Risk Adjusted Performance | 0.2503 | |||
| Mean Deviation | 1.6 | |||
| Coefficient Of Variation | (4,252) | |||
| Standard Deviation | 2.09 | |||
| Variance | 4.35 | |||
| Information Ratio | (0.09) |
Please note, the risk measures we provide can be used independently or collectively to perform a risk assessment. When comparing two potential commoditys, we recommend comparing similar commoditys with homogenous growth potential and valuation from related markets to determine which investment holds the most risk.
Brent Crude Suggested Diversification Pairs
Pair trading is one of the very effective strategies used by professional day traders and hedge funds capitalizing on short-time and mid-term market inefficiencies. The approach is based on the fact that the ratio of prices of two correlating shares is long-term stable and oscillates around the average value. If the correlation ratio comes outside the common area, you can speculate with a high success rate that the ratio will return to the mean value and collect a profit.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Brent Crude as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Brent Crude's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Brent Crude's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Brent Crude Oil.