Correlations with US crude oil
On May 3–10, major energy subsector ETFs’ correlations with US crude oil June futures were:
- the VanEck Vectors Oil Services ETF (OIH) at 45.6%
- the Energy Select Sector SPDR ETF (XLE) at 34.6%
- the Alerian MLP ETF (AMLP) at 13.1%
- the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) at -13.1%
In the seven calendar days to May 10, the four ETFs rose 4.8%, 4.3%, 1.3%, and 6.9%, respectively. US crude oil June futures rose 4.3% during this period.
In the trailing week, most of the energy ETFs rose steadily. US crude oil prices were volatile, which could be behind the relatively low correlations of these ETFs with oil prices.
XOP’s relative outperformance compared to major energy subsector ETFs could be because of 77.6% exposure to oil and gas exploration and production stocks, which stand to gain from higher oil prices.
On May 3–10, these four energy ETFs were broadly inversely related to natural gas futures. AMLP had the highest negative correlation of 92.2%, while XLE had the least negative correlation of 15.3% with natural gas futures during this period. Natural gas June futures rose 3.2% in the trailing week.
In the seven calendar days to May 10, these energy ETFs’ correlations with the S&P 500 Index (SPY) were:
- OIH at 27.4%
- XLE at 25.4%
- XOP at -3.6%
- AMLP at -18.2%
In the last five trading sessions, SPY rose 3.5%. Despite relatively low correlations, the rise in the US energy sector might have benefited the equity markets.