Correlation with US crude oil
On November 8–15, major energy ETFs had the following correlations with US crude oil January futures:
- the VanEck Vectors Oil Services ETF (OIH): 71.2%
- the Energy Select Sector SPDR ETF (XLE): 65.5%
- the Alerian MLP ETF (AMLP): 56.6%
- the SPDR S&P Oil & Gas Exploration & Production ETF (XOP): 37.8%
US crude oil and energy ETFs
US crude oil January futures fell 6.9% in the trailing week. XLE, AMLP, XOP, and OIH fell 3.2%, 3.5%, 4.4%, and 7.3%, respectively, during the same period. Based on the correlations, these energy ETFs might have a positive relationship with oil prices. OIH underperformed US crude oil’s fall and other energy ETFs in the seven calendar days to November 15. Notably, OIH had the highest correlation with US crude oil prices during this period.
In the trailing week, AMLP, XLE, XOP, and OIH had negative correlations with natural gas December futures of 62.3%, 51.2%, 43.5%, and 33.5%, respectively. Natural gas December futures rose 14% during this period. Based on the correlations, these energy ETFs might have moved inversely to natural gas prices.
Energy ETFs had the following correlations with the S&P 500 Index in the past five trading sessions:
- XOP: 79.5%
- AMLP: 76.4%
- XLE: 64.9%
- OIH: 59.5%
The S&P 500 Index (SPY) fell 2.7% in the past five trading sessions. The fall in the broader market might have also dragged these ETFs—based on the correlations. Notably, the correlation of these energy ETFs with the S&P 500 is in an order just opposite to the correlation with US crude oil.
Next, we’ll discuss oil’s correlation with the equity market.