- 10/05/2021 at 1:52 am #82475sylphaParticipant
Is there a strategy/portfolio could benefit from rising commodity and energy price? I am not aware of any strategy buying commodity ETFs (maybe just I don’t come across them). Thanks.10/12/2021 at 1:57 pm #82487
The closest is GSRS but it’s not even in commodities right now. The problem is over the long term energy and commodities asset correlations do not benefit equity returns and sharp ratios like Gold and silver. The volatility is also high and that creates other problems. The best you can do is build your own strategy in QT. I have 3 different strategies I use.
There is some overlap depending on ETF you use to create them. I also use highly liquid ETF you can find almost any commodity but many are low liquidity (Vol<100k).
These 3 I used in a strategy of strategy just like LI Strategy of Strategy.
MV10/12/2021 at 1:58 pm #82488
Sorry that should have said:
The problem is over the long term energy and commodities asset correlations do not benefit equity returns and sharp ratios like Gold and Bonds.
Not Silver.10/18/2021 at 6:20 am #82512Frank1 GrossmannKeymaster
I already tried to build strategies which selects the top ETFs of the below list, I could however never find any strategy which really worked. The reason was the very high correlation of all commodities and the fact that most of them have commodity Futures as underlying which are most of the time in contango due to high storage costs. Due to this contango each future roll is expensive and if you look at these commodity ETF charts, then they all tend to go down over longer periods.
USO, US Oil
UNG, US natural gas
SOYB, soya bean
FUE, Biofuel10/18/2021 at 2:58 pm #82519
What if your hypothesis is that hard assets will rise? I just use the same type of Strategy as 0 LI strategies of strategies and add Metals, Energy and commodities. During 2020 the strategy was rarely in these 3 hard assets but during 2021 it has always been in at least one of them. The system is picking them purely on it’s price action. When the price action goes down the system won’t pick any of my hard asset models and picks the other LI strategies.
I think this is cherry picking winning assets but if hard assets continue to rise I will benefit if they dont’t the strategy will kick me out without to much of a loss.
MV10/19/2021 at 5:46 am #82520Frank1 GrossmannKeymaster
You are right, in combination with other asset classes commodities may be a good diversification. This way for most of the time you will be mainly invested in equity but you can still profit from the relatively short periods commodity prices are rising. In order to reduce volatility a good addition are ETFs like DBC, DBB and DBP.
Some of the above commodities im my list have very high volatilities 40+% so that you should use SRRP mode (risk parity) if you do a Top x commodities strategy. In general strategies work best if the different assets have similar volatilities.10/19/2021 at 11:40 am #82522
I took your advice for my energy strategy using the following Symbols:
First Trust Natural Gas ETF FCG
United States Brent Oil BNO
United States Oil USO
SPDR S&P Oil&Gas Explor&Prodtn XOP
I changed it to SRRP works much better.
My next question is what criteria do you use to add or subtract a asset from a strategy? You already mentioned similar volatilities. Do you look for high correlation between assets or low? What other criteria do you look for? Is it more of a Hypothesis that these assets will rise in price?
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