Intra-day co-movements of crude oil futures: China and the international benchmarks

Abstract

Investigating the co-movements between crude oil futures helps to understand the integration of the global markets. This paper focuses on Shanghai crude oil futures (INE) and study its comovements with the international benchmarks of WTI and Brent crude oil futures in intra-day day and night trading sessions. A complex network model framework is proposed to analyse the intra-day co-movement patterns labelled by a functional data clustering approach on intra-day return curves. Our findings indicate INE is more integrated with the global market during the night session, but it shows a regional fractional effect during the day session. Based on the revealed dynamics of co-movement patterns, we further design a pairs trading strategy between INE crude oil futures and the international benchmarks. The simulation results show that the pairs trading strategy can be promisingly profitable, even during market turmoil phases. KeywordsINE Crude oil futures • WTI and Brent • Intra-day co-movement patterns • Complex network model • Pairs trading JEL Classification C12 • C52 • G11 • G15 B Qiang Ji

Financial modeling, risk management of energy and environmental instruments and derivatives: past, present, and future

“…Ji et al ( 2021 ) study the co-movements of the Shanghai crude oil futures with Brent and WTI crude oil futures. It is noticed that the Shanghai crude oil futures are more integrated with the other two reference prices during night sessions.…”

A Lead‐Lag Relationship and Forecast Research between China’s Crude Oil Futures and Spot Markets

“…In terms of research on the relationship between Chinese crude oil futures and spot, using a complex network model, Ji et al found a higher degree of integration with the global market during the nighttime trading hours but a regional fractional effect during the daytime hours [16]. By analyzing the correlation between Chinese crude oil futures and spot, Jie et al found that Chinese crude oil futures achieved their main functions and establishment goals [17].…”

“…In addition, the outbreak exacerbated the spillover effects of the commodity markets to the US and Chinese stock markets [31]. At the same time, the coflow of Chinese crude oil futures with international benchmark crude oil futures weakened, thus providing investors with a way to hedge their risks [16].…”

Network analysis of comovements among newly-built residential house price indices of seventy Chinese cities

“…To fulfill this kind of enormous task, taking into consideration housing price dependence across many different regions and transmission mechanisms is extremely important (Zhang and Fan, 2019; Hjort et al , 2022). Under this circumstance, concepts of price comovements and connectednesses (Zhang et al , 2020; Ji et al , 2021b; Wu et al , 2021a) across spatially separated regional markets will need to be investigated and understood, which could also benefit investors in the real estate market for the purpose of portfolio optimizations and risk diversifications (Antonakakis et al , 2018; Geng et al , 2021b; Hu et al , 2020).…”