{"title":"Portfolio Hedging Strategy - Metals and Commodities","authors":"","doi":"10.46544/ams.v28i2.19","DOIUrl":null,"url":null,"abstract":"From the perspective of portfolio management, hedging is a proactive risk management measure that aims to protect the portfolio from unwanted drawdown risk and avoid loss on investment by incorporating assets into a portfolio which moves in the opposite direction as the market. However, trying to limit the risk could result in limiting potential profits. Commodities are one of the best hedges against inflation as their price typically accelerates during such times providing benefit to the investor. We use the innovative approach of hedging commodities using a combination of CAPM and RSI Strategy to identify which of 9 observed hard commodities (Aluminium, Zinc, Nickel, Lead, Tin, Copper, Gold, Brent Oil and Natural Gas) should have been incorporated into investment portfolio during the period 2008-2023. The SML strategy is reviewed in the empirical analysis for its suitability as a hedging instrument compared to the RSI, which is regularly used to hedge metals and commodities. Our MS Excel and IBM SPSS software analysis showed that RSI was a better hedging strategy than SML in 21 out of 36 cases but without statistical significance.","PeriodicalId":50889,"journal":{"name":"Acta Montanistica Slovaca","volume":"190 1","pages":"0"},"PeriodicalIF":2.2000,"publicationDate":"2023-09-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Acta Montanistica Slovaca","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.46544/ams.v28i2.19","RegionNum":4,"RegionCategory":"地球科学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"GEOSCIENCES, MULTIDISCIPLINARY","Score":null,"Total":0}
引用次数: 0
Abstract
From the perspective of portfolio management, hedging is a proactive risk management measure that aims to protect the portfolio from unwanted drawdown risk and avoid loss on investment by incorporating assets into a portfolio which moves in the opposite direction as the market. However, trying to limit the risk could result in limiting potential profits. Commodities are one of the best hedges against inflation as their price typically accelerates during such times providing benefit to the investor. We use the innovative approach of hedging commodities using a combination of CAPM and RSI Strategy to identify which of 9 observed hard commodities (Aluminium, Zinc, Nickel, Lead, Tin, Copper, Gold, Brent Oil and Natural Gas) should have been incorporated into investment portfolio during the period 2008-2023. The SML strategy is reviewed in the empirical analysis for its suitability as a hedging instrument compared to the RSI, which is regularly used to hedge metals and commodities. Our MS Excel and IBM SPSS software analysis showed that RSI was a better hedging strategy than SML in 21 out of 36 cases but without statistical significance.
期刊介绍：
Acta Montanistica Slovaca publishes high quality articles on basic and applied research in the following fields:
geology and geological survey;
mining;
Earth resources;
underground engineering and geotechnics;
mining mechanization, mining transport, deep hole drilling;
ecotechnology and mineralurgy;
process control, automation and applied informatics in raw materials extraction, utilization and processing;
other similar fields.
Acta Montanistica Slovaca is the only scientific journal of this kind in Central, Eastern and South Eastern Europe.
The submitted manuscripts should contribute significantly to the international literature, even if the focus can be regional. Manuscripts should cite the extant and relevant international literature, should clearly state what the wider contribution is (e.g. a novel discovery, application of a new technique or methodology, application of an existing methodology to a new problem), and should discuss the importance of the work in the international context.
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