Investing in commodity ETFs for diversification

For investors interested in commodity ETFs, there are lots of them on the market. Many are tracked live here.

As with the global ETFs,  correlations are extremely important for proper diversification. Below is the updated table of correlations of all commodity ETFs that trade in the U.S. with values from December 1st 2009 to January 31 2010.

The green shaded cells hows those pairs of commodities that are highly positively correlated (over 0.85). Interestingly, the table also shows the negative correlations, which would be shown in red. There are none.

Regardless, what investors should look for are the non correlations, which are marked in blue text and shaded in light yellow.

These are the best pairs:

• COW and JJA, GRN, JJO, RJA
• DBA (agriculture) and JJT, GRN (global carbon)
• JJS and DAG
• NIB and BAL, DPU, FUD, GCC, JJG, LSC
• PWND and GRN (wind evergy and global carbon)
• UBC and JO, AGF, DPU, DYY, FUD, FUE

GRN (global carbon) consitently comes up in the list of uncorrelated ETFs.


ETF symbols and names: