IXC could react positively to a weaker US dollar
The iShares Global Energy ETF (IXC) is set to outperform other ETFs shown in the following table if the US dollar weakens more. In the last ten years, IXC had a correlation of -35.30% with the US Dollar Index. WTI crude oil had a correlation of -31.3% with the US Dollar Index in the same timeframe. This shows that a weaker US dollar can push IXC’s price higher.
Why IXC is more reactive to the US Dollar Index compared to crude oil
Currently, US-based oil and gas companies account for 60% of IXC. It’s important to note that 40% are foreign oil and gas companies. Cross-currency risk is one of the factors that could impact IXC’s performance compared to crude. Therefore, it’s more reactive to the US Dollar Index compared to crude oil.
ETFs are less reactive to the US Dollar Index
The correlation analysis of the last ten years suggests that the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the Energy Select Sector SPDR ETF (XLE) had a correlation of -28.39% and -28.61%. Both of the ETFs are impacted by the US Dollar Index because they contain exploration and production companies. Since all of the companies are US (SPY)-based, they will likely be impacted less by the US Dollar Index compared to IXC. Diamondback Energy (FANG), Concho Resources (CXO), and Antero Resources (AR) have a total weight of 3.8% in XOP.