Portfolio optimization of financial commodities with energy futures

Abstract

The recent growth in economic and financial markets has brought the focus on energy derivatives as an alternative investment class for investors, financial analysts, and portfolio managers. The financial modeling and risk management of portfolios using the energy derivatives instrument is a requirement and challenge for researchers in the field. The energy and other commodity futures force the expert investors to investigate the broader investment spectrum and consequently diversify their portfolios using the futures instruments. Going beyond the conventional portfolios and developing out-of-the-box strategies that comply with the changing financial and economic advancements are the keys to long-term sustainability in the financial world. This study investigates the impact of diversification with five energy futures from January 2011 to July 2020 on three traditional commodity futures portfolios. The results show that diversification increased the returns while simultaneously reducing the portfolio volatility in all portfolios. The diversified portfolios provided higher returns than the traditional portfolios for the same level of risk. This study also revealed that the results might improve when a short position in the futures contracts is allowed. Moreover, we conclude that adding multiple energy futures in a portfolio provides enhanced diversification results, whereas the WTI crude oil futures fail to diversify any portfolio considered in the study.

Financial Statement and Ratio Analysis of Force Motors and Yamaha Motors: An Empirical Study

“…By comparing these companies generally and financially we know that both company's revenue is different but during analysis and financial statements the greater revenue was generated by Yamaha motors because it is public transport equipment company and force motors vehicles are mostly used in loading material and other work filed activities (Wang et al, 2022), so the main point is that by comparing these two companies is automobile companies are used in big number in the whole of the world so both companies are gain profit in this motor system world. By analyzing these financial statements, we know about the financial activities of companies and through this analysis, we get information about that which company is profitable or not for investing.…”

Does COVID-19 pandemic cause natural resources commodity prices volatility? Empirical evidence from China

“…On the other hand, Raza et al (2018) claim that oilprices are positively associated to economic activities in the USA during the period 1979M1–2013M7. Due to this, Wang et al (2021) asserted that diversification is a better option to enhance profitability in the USA. However, economic activities are the leading factor of economic growth across the globe.…”

“… Raza et al (2018) USA (1979M1–2013M7) Wavelet Methods Oil prices positively affect economic activities. Zhang et al (2021) China (1965–2019) Granger Causality Economic growth causes carbon emissions Wang et al (2021) USA (January 4, 2011–July 31, 2020) Econometric techniques Diversification enhances profitability but reduces volatility in portfolio. Umar et al (2020a) China (1980–2017) FMOLS, DOLS, CCR Economic growth and natural resources are the factors of emissions.…”

Financial modeling, risk management of energy and environmental instruments and derivatives: past, present, and future

“…Using the multifractal correlation measure, the authors observe a significant but negative tail dependence on oil and gold prices for a short duration. Wang et al ( 2021 ) investigate the diversification impacts of energy futures on three traditional commodity futures prices. Using Markowitz’s mean–variance model and Sharpe ratio, the authors find that the crude oil futures are not a good diversifier for any portfolios.…”