PT - JOURNAL ARTICLE AU - Joƫlle Miffre AU - Adrian Fernandez-Perez TI - The Case for Long-Short Commodity Investing AID - 10.3905/jai.2015.18.1.092 DP - 2015 Jun 30 TA - The Journal of Alternative Investments PG - 92--104 VI - 18 IP - 1 4099 - https://pm-research.com/content/18/1/92.short 4100 - https://pm-research.com/content/18/1/92.full AB - The article presents strong evidence in favor of long-short (as opposed to long-only) commodity investments. We show that long-short fully collateralized commodity portfolios based on momentum, term structure or hedging pressure present higher Sharperatios, lower volatility and lower correlation with the S&P 500 index than long-only commodity portfolios. Besides long-short hedging pressure portfolios serve as partial hedge against extreme equity risk as they present decreasing correlations with the S&P 500 index in periods of heightened equity volatility. This is good news to equity investors: it is precisely when the volatility of equity markets is high that the benefits of diversification are most appreciated. In contrast, the conditional correlation between the S&P 500 and long-only commodity indices substantially rises with the S&P 500 volatility, suggesting that the risk diversification of long-only commodity portfolios prevails less when needed most.TOPICS: Commodities, portfolio construction, risk management, statistical methods