IDEAS home Printed from https://ideas.repec.org/a/eee/jocoma/v38y2025ics2405851325000170.html
   My bibliography  Save this article

Commodity correlation risk

Author

Listed:
  • Byrne, Joseph P.
  • Sakemoto, Ryuta

Abstract

It is widely observed that primary commodity prices comove. A parallel literature asserts that correlation risk matters for financial returns. Our novel study connects these topics and presents evidence that commodity correlation risk is both non-constant and important for returns. We reconsider therefore the relationship between primary commodities, risk and macro fundamentals, utilising methods that account for parameter uncertainty and stochastic volatility. We show that correlation risk is positively related to commodity returns and the strongest impact of risk upon return is more recent. We also demonstrate that commodity correlation risk is strongly counter-cyclical, correlation risk predicts returns, our risk measure is unrelated to other risk/uncertainty measures, and that correlation risk is linked to commodity financialization.

Suggested Citation

  • Byrne, Joseph P. & Sakemoto, Ryuta, 2025. "Commodity correlation risk," Journal of Commodity Markets, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:jocoma:v:38:y:2025:i:c:s2405851325000170
    DOI: 10.1016/j.jcomm.2025.100473
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S2405851325000170
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jcomm.2025.100473?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Primary commodity returns; Commodity correlation risk; Commodity comovement;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • G1 - Financial Economics - - General Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jocoma:v:38:y:2025:i:c:s2405851325000170. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jcomm .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.