Correlation Between IShares Commodity and USCF SummerHaven

Can any of the company-specific risk be diversified away by investing in both IShares Commodity and USCF SummerHaven 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 IShares Commodity and USCF SummerHaven into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Commodity Curve and USCF SummerHaven Dynamic, you can compare the effects of market volatilities on IShares Commodity and USCF SummerHaven 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 IShares Commodity with a short position of USCF SummerHaven. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Commodity and USCF SummerHaven.

Diversification Opportunities for IShares Commodity and USCF SummerHaven

0.76

Correlation Coefficient

IShares Commodity  USCF SummerHaven

Poor diversification

The 3 months correlation between IShares and USCF is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares Commodity Curve and USCF SummerHaven Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USCF SummerHaven Dynamic and IShares Commodity 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 iShares Commodity Curve are associated (or correlated) with USCF SummerHaven. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USCF SummerHaven Dynamic has no effect on the direction of IShares Commodity i.e., IShares Commodity and USCF SummerHaven go up and down completely randomly.

Pair Corralation between IShares Commodity and USCF SummerHaven

Given the investment horizon of 90 days IShares Commodity is expected to generate 3.69 times less return on investment than USCF SummerHaven. In addition to that, IShares Commodity is 1.23 times more volatile than USCF SummerHaven Dynamic. It trades about 0.03 of its total potential returns per unit of risk. USCF SummerHaven Dynamic is currently generating about 0.16 per unit of volatility. If you would invest  1,865  in USCF SummerHaven Dynamic on September 3, 2024 and sell it today you would earn a total of  160.00  from holding USCF SummerHaven Dynamic or generate 8.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

iShares Commodity Curve  vs.  USCF SummerHaven Dynamic

iShares Commodity Curve

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Commodity Curve are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Commodity is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

USCF SummerHaven Dynamic

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in USCF SummerHaven Dynamic are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental indicators, USCF SummerHaven may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Commodity and USCF SummerHaven

The main advantage of trading using opposite IShares Commodity and USCF SummerHaven positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Commodity position performs unexpectedly, USCF SummerHaven 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 USCF SummerHaven will offset losses from the drop in USCF SummerHaven's long position.

The idea behind iShares Commodity Curve and USCF SummerHaven Dynamic 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.

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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..