Correlation Between 2 Year and Gasoline RBOB

Can any of the company-specific risk be diversified away by investing in both 2 Year and Gasoline RBOB 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 2 Year and Gasoline RBOB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 2 Year T Note Futures and Gasoline RBOB, you can compare the effects of market volatilities on 2 Year and Gasoline RBOB 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 2 Year with a short position of Gasoline RBOB. Check out your portfolio center. Please also check ongoing floating volatility patterns of 2 Year and Gasoline RBOB.

Diversification Opportunities for 2 Year and Gasoline RBOB

-0.12

Correlation Coefficient

2 Year  Gasoline RBOB

Good diversification

The 3 months correlation between ZTUSD and Gasoline is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding 2 Year T Note Futures and Gasoline RBOB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gasoline RBOB and 2 Year 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 2 Year T Note Futures are associated (or correlated) with Gasoline RBOB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gasoline RBOB has no effect on the direction of 2 Year i.e., 2 Year and Gasoline RBOB go up and down completely randomly.

Pair Corralation between 2 Year and Gasoline RBOB

Assuming the 90 days horizon 2 Year T Note Futures is expected to generate 0.07 times more return on investment than Gasoline RBOB. However, 2 Year T Note Futures is 14.79 times less risky than Gasoline RBOB. It trades about -0.06 of its potential returns per unit of risk. Gasoline RBOB is currently generating about -0.05 per unit of risk. If you would invest  10,327  in 2 Year T Note Futures on August 30, 2024 and sell it today you would lose (51.00) from holding 2 Year T Note Futures or give up 0.49% of portfolio value over 90 days.

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

2 Year T Note Futures  vs.  Gasoline RBOB

2 Year T

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 2 Year T Note Futures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, 2 Year is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Gasoline RBOB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gasoline RBOB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Gasoline RBOB is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with 2 Year and Gasoline RBOB

The main advantage of trading using opposite 2 Year and Gasoline RBOB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 2 Year position performs unexpectedly, Gasoline RBOB 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 Gasoline RBOB will offset losses from the drop in Gasoline RBOB's long position.

The idea behind 2 Year T Note Futures and Gasoline RBOB 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.

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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.