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Is Oil Limiting Your Energy Portfolio’s Losses?

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Jan. 19 2018, Updated 4:30 p.m. ET

Energy ETF correlations

Between January 11 and January 18, 2018, the Energy Select Sector SPDR ETF (XLE) had the highest correlation of 87.8% with US crude oil futures among energy subsector ETFs. In fact, it fell 0.3%, the least among energy subsector ETFs over this period. US crude oil March futures rose 0.3% over this time period. So, steady crude oil prices likely helped support energy stocks in the trailing week.

Other energy ETFs like the Alerian MLP ETF (AMLP), the VanEck Vectors Oil Services ETF (OIH), and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) had correlations of 55%, 47.7%, and 68.7%, respectively, with US crude oil futures in the trailing week. These three energy ETFs fell 0.8%, 2.6%, and 1.3%, respectively, over this period.

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Natural gas

Between January 11 and January 18, 2018, XLE, XOP, AMLP, and OIH had correlations of 72.9%, 38.4%, 17.4%, and 10.4%, respectively, with natural gas February futures. Natural gas February futures rose 3.4% in this time period. So, strong natural gas prices also likely helped XLE outperform its peers.

Broader market

In the trailing week, XLE, XOP, AMLP, and OIH had correlations of 53.8%, 15.6%, -11.3%, and -13.3%, respectively, with the S&P 500 Index (SPY). The S&P 500 Index gained 1.1% in this period. So, for XLE, energy commodities and the broader market helped limit its fall.

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