Correlation Between USCF SummerHaven and IShares Commodity

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

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

Diversification Opportunities for USCF SummerHaven and IShares Commodity

0.75

Correlation Coefficient

USCF SummerHaven  IShares Commodity

Poor diversification

The 3 months correlation between USCF and IShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding USCF SummerHaven Dynamic and iShares Commodity Curve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Commodity Curve and USCF SummerHaven 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 USCF SummerHaven Dynamic are associated (or correlated) with IShares Commodity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Commodity Curve has no effect on the direction of USCF SummerHaven i.e., USCF SummerHaven and IShares Commodity go up and down completely randomly.

Pair Corralation between USCF SummerHaven and IShares Commodity

Given the investment horizon of 90 days USCF SummerHaven Dynamic is expected to generate 0.88 times more return on investment than IShares Commodity. However, USCF SummerHaven Dynamic is 1.14 times less risky than IShares Commodity. It trades about 0.04 of its potential returns per unit of risk. iShares Commodity Curve is currently generating about 0.02 per unit of risk. If you would invest  1,729  in USCF SummerHaven Dynamic on September 4, 2024 and sell it today you would earn a total of  280.00  from holding USCF SummerHaven Dynamic or generate 16.19% return on investment over 90 days.

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

USCF SummerHaven Dynamic  vs.  iShares Commodity Curve

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.

iShares Commodity Curve

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Commodity Curve are ranked lower than 4 (%) 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.

Pair Trading with USCF SummerHaven and IShares Commodity

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

The idea behind USCF SummerHaven Dynamic and iShares Commodity Curve 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.