Correlation Between CBOE Crude and US Global

Can any of the company-specific risk be diversified away by investing in both CBOE Crude and US Global 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 CBOE Crude and US Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CBOE Crude Oil and US Global Investors, you can compare the effects of market volatilities on CBOE Crude and US Global 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 CBOE Crude with a short position of US Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of CBOE Crude and US Global.

Diversification Opportunities for CBOE Crude and US Global

-0.04

Correlation Coefficient

CBOE Crude  US Global

Good diversification

The 3 months correlation between CBOE and GROW is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding CBOE Crude Oil and US Global Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Global Investors and CBOE Crude 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 CBOE Crude Oil are associated (or correlated) with US Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Global Investors has no effect on the direction of CBOE Crude i.e., CBOE Crude and US Global go up and down completely randomly.

Pair Corralation between CBOE Crude and US Global

Assuming the 90 days trading horizon CBOE Crude Oil is expected to under-perform the US Global. In addition to that, CBOE Crude is 5.48 times more volatile than US Global Investors. It trades about -0.12 of its total potential returns per unit of risk. US Global Investors is currently generating about -0.01 per unit of volatility. If you would invest  243.00  in US Global Investors on September 19, 2024 and sell it today you would lose (1.00) from holding US Global Investors or give up 0.41% of portfolio value over 90 days.

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

CBOE Crude Oil  vs.  US Global Investors

Pair Trading with CBOE Crude and US Global

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

The idea behind CBOE Crude Oil and US Global Investors 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.