Heating oil vs. Crude oil

Heating oil accounts for about 25% of the yield of a barrel of crude oil, the second largest “cut” after gasoline (petrol) and heating oil futures are used to hedge diesel fuel and jet fuel. This all makes heating oil a high correlated asset to crude oil. This is one reason why long heating oil, short crude oil might seem like a ridiculous pair strategy idea.
We have been talking about trading highly correlated pairs since July 2008. Today we initiate short heating oil and long AIGE (DJ-USBCI Energy Index ETF). Performance cycles suggest that heating oil should underperform the Energy Index. Natural Gas delivered against AIGE and Carbon (CARB.L) since April this year delivering 17% and 22% respectively. Highly correlated, negatively correlated or poor correlated pairs don’t mean much if one does not study cyclicality in correlation.
The latest alpha carries numeric ranking, numeric ranking changes, performance cycles, new pair signals, strategy updates and pair tracker.
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Numeric Ranking
Strategy Update

Performance Cycles
ALPHA is a pair trading, long only – short only strategy and numeric ranking product based on TIME fractals. Time arbitrage, Time Triads, Time fractals are terms coined by Orpheus Research. The signals are carried over three different time frames viz. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). This is a daily signal product. The signals will be illustrated through tracker and running portfolios. Alpha can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades. This is a part of the time triads analytics developed by Orpheus Research.
Assets Covered : Nat Gas ETC, XLE Spdr, Schlumberger, Conoco Phillips, Occidental Petroleum, Chevron, Exxon, Apache Corporation, Anadarko petroleum, Gazprom, Nat Gas Spot, Devon Energy, Halliburton, XTO Energy, Transocean, Marathon Oil, EOG Resources, National Oilwell, Hess, Chesapeake, South Western, Diamond Offshore, Baker Hughes, Weatherford, Carbon, Heating Oil, Petroleum, Gasoline, Crude Oil.
*This is a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager to execute these pairs. For more details please subscribe to the ORPHEUS TIME ANALYTICS research products.