Taking Full Advantage of the Statistical Properties of Commodity Investments

Academic and practitioner research has documented that commodities yield important risk-reduction benefits for a portfolio invested mainly in financial assets. It is perhaps less well known that individual commodity strategies can be so uncorrelated that they can significantly dampen the risk of a commodity-only portfolio. In this article we discuss how an investor can take full advantage of the unique statistical properties of this asset class. A revisited version of this paper was published in the Summer 2001 issue of the Journal of Alternative Investments.