Yahoo Finance How Did Crude Oil’s Rally Impact the Commodity Complex?
Why Is Crude Oil Driving Broader Market Sentiments?
Correlation of DBC with US crude oil
The PowerShares DB Commodity Tracking ETF (DBC) has been highly correlated with crude oil over the past year. DBC has 16.8% exposure to crude oil and crude oil derivatives. DBC’s correlation with US (SPY)(IVV) crude oil hasn’t fallen below 70% in the past year. A high correlation with crude oil shows the importance of crude oil–related sentiments for DBC. The following graph shows DBC’s 30-day correlation with US crude oil (USO) over the past year.
During the first three weeks of April 2016, DBC rallied 2% and crude oil rose 5.2%. During the same period, the correlation with crude oil fluctuated between 75% and 95%. The crude oil production freeze talk among major crude oil producers was the major driver for crude oil prices in first three weeks of April 2016. This shows the importance of crude oil–related mainstream news for DBC.
Oil-weighted stock
Crude oil–related sentiments are also important factors for oil-weighted stocks like Oasis Petroleum (OAS), Triangle Petroleum (TPLM), and Denbury Resources (DNR).
Browse this series on Market Realist:
