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Analyzing Oil’s Rise in Q1

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US equity indexes

In the first quarter, US equity indexes had the following correlations with US crude oil active futures:

  • the S&P Mid-Cap 400 (IVOO): 42.6%
  • the Dow Jones Industrial Average (DIA): 38.9%
  • the S&P 500 (SPY): 38.9%

These three equity indexes have exposure of ~3.7%, ~5.4%, and 5.4% to the energy sector, respectively. The equity indexes have risen 13.7%, 10.2%, and 12.3%, respectively, in the first quarter. US crude oil active futures rose 30.6% during this period.

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Oil’s rise and equity indexes

The correlations indicate a positive relationship between oil and these US equity indexes. In recent months, movements in the broader market have dominated oil prices. Apart from the rise in US equity indexes, OPEC’s cuts are another important factor for oil’s rise.

So far in the first quarter, the Energy Select Sector SPDR ETF (XLE) has risen 15.5%. XLE was the third-largest gainer among the SPDR ETFs that break the broad market into subsectors. US equity indexes are in the green, which might have supported XLE.

The Health Care Select Sector SPDR Fund (XLV) has risen 4.8% and has underperformed the SPDR ETFs in the first quarter. During this period, the Technology Select Sector SPDR ETF (XLK) rose 18.2% and was the top gainer among sector-based SPDR ETFs. All of the SPDR ETFs ended in the green.

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