What makes commodities unique as an asset class is the fact that they are not well categorized or correlated. There is more dispersion in commodities than in most other asset classes as measured by average correlation within a set or more sophisticated measure of correlation within a matrix of assets. Energy can move higher while metals move lower. Precious metals will not be linked with non-ferrous metals. Grain markets will not move with softs or tropical markets.
This decoupling has become more evident this year as grain markets have declined while other sectors have moved in different directions. This provides dampened returns and volatility for indices but also offers opportunities for those managers which can move back and forth between long and short positions.
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