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What Could Drive Energy ETFs?

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Dec. 4 2020, Updated 10:52 a.m. ET

Energy ETF performances

In this part, we’ll examine the performance of different energy ETFs. First, let’s look at their performances between May 11 and May 18, 2017:

  • The VanEck Vectors Oil Services ETF (OIH) fell 0.7%.
  • The Alerian MLP ETF (AMLP) fell 1%.
  • The Energy Select Sector SPDR ETF (XLE) fell 1.1%.
  • The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) fell 2.1%.
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Correlation with crude oil and natural gas

Among the energy ETFs, the Energy Select Sector SPDR ETF (XLE) had the highest correlation with US oil (UCO)(USO) prices at 78.7% between May 11 and May 18, 2017. On the other hand, AMLP had the least positive correlation with US crude oil during this period. Except AMLP, all of the ETFs saw their correlation with crude oil rise in the trailing week compared to the last three months.

All of the ETFs discussed above had very low correlations with natural gas between May 11 and May 18.

Correlation with the broader market

Between May 11 and May 18, 2017, AMLP had the highest positive correlation with the S&P 500 Index (SPX-INDEX) (SPY). The correlation stood at 51.5%. XOP had the least positive correlation with the S&P 500 Index.

Crude oil prices and sentiment in the broader market could be crucial for the above ETFs. These four energy ETFs have high positive correlations with crude oil compared to natural gas. Read Market Realist’s series on crude quantitative drivers every Wednesday for more analysis.

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