Introduction to Commodities Exchange-Traded Funds

While individual stocks tend to be highly correlated with each other, commodities maintain low correlation to stock and bond markets. Commodities can, therefore, offer the benefits of diversification within a portfolio of traditional securities. Driven by the strong price appreciation of commodities over the past several years and the academic research, interest in commodities investing has increased. The broad commodities space has been recognized to offer the benefit of an inflationary hedge as commodities maintain a high positive correlation to inflation. These two characteristics (diversification away from traditional highly correlated asset classes, and inflationary hedging) support the argument for commodities as an asset class.