commodities trading

[d.koutsomito]

Hello,

I am interested in building a portfolio based on commodities. Do you have any advice? Which are the important points I should focus on?
Also, I am looking for the correlations of different type of commodities, is there any website where I can
find them?

Thank you in advance.

 

[moretodo]

If your portfolio only contains commodities, then your portfolio most certainly will not be optimal in the true sense since you will not be able to eradicate the idiosyncratic risk component from your portfolio variance that is common to all commodities. For instance, a idiosyncratic component that is common to all commodities is storage costs. There are quite a few equities which exhibit a reverse pattern in terms of effects of storage costs on the underlying asset price that would help counter this idiosyncratic risk.

 

[d.koutsomito]

Thank you for your reply. However, I want to speculate on the commodity price, so I do not focus on the delivery of the commodity and thus on the storage costs. Therefore, I am looking for a strategy that will be profitable. Another question is whether or not I can make profit from a short-term investment and, if yes, of which percentage.

 

[moretodo]

Thank you for your reply. However, I want to speculate on the commodity price, so I do not focus on the delivery of the commodity and thus on the storage costs. Therefore, I am looking for a strategy that will be profitable. Another question is whether or not I can make profit from a short-term investment and, if yes, of which percentage.

The underlying volatility in any commodity price is a function of the volatility in storage price among others regardless of whether you want it for delivery or not.

 

[Abdulrahman Yussuf]

If you're interested in trading without a model message me @magnusson_q on twitter

 

[ygmwy]

Thank you for your reply. However, I want to speculate on the commodity price, so I do not focus on the delivery of the commodity and thus on the storage costs. Therefore, I am looking for a strategy that will be profitable. Another question is whether or not I can make profit from a short-term investment and, if yes, of which percentage.

Sounds dangerous. Good luck!

 

[Grieze]

I know I am late to this thread, but it should be mentioned commodities are a very hard industry to use quantitative trading strategies on. The reason being is because you are dealing with a physical good that is being transported from one area of the world to another. It's not a liquid asset at all, and hence algorithmic trading strategies are not a good fit for it. You can still use statistical analysis to help you in fundamental analysis, but at the end of the day, it really falls down to supply and demand. It's not like equities or forex where you can trade on some random signal because of how liquid the markets are.