The Paradox of Commodities: Adding Risk to Reduce Risk

Executive Summary The commodity markets are significantly smaller and more fragmented than other major asset markets such as equities and bonds. Hence, available benchmarks differ greatly in the composition and the calculation methodologies and give varying pictures about volatility and returns over different time periods. Nonetheless, these benchmarks demonstrate a high degree of homogeneity in terms of their long term price behaviour and the correlation with other asset markets.