Re: Correlation between futures prices and the underlying asset?
- From: CliffMacgillivray <nospam@xxxxxxxxxxxxxx>
- Date: Thu, 23 Jun 2005 14:00:13 -0400
Brablo wrote:
We hear about crude oil approaching $60/barrel. However, there is very little correlation between this number and the price per gallon of gas.
What is the correlation of the two? Also, why isn't the price of gas not very correlated with the movement of crude oil, as one would expect?
The price of crude will lead the actual price of gas because the gas you put into your car is crude which has been refined and trucked to a gas station so it hasn't been crude in a while. Not sure about the actual turn around time from crude to gas but it is long enough so that the price movements are not in perfect lockstep. They do match up pretty well though.
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