Correlation with US crude oil
On May 30–June 6, major energy ETFs had the following correlations with US crude oil active futures:
- the Energy Select Sector SPDR ETF (XLE): 97.8%
- the VanEck Vectors Oil Services ETF (OIH): 85.2%
- the SPDR S&P Oil & Gas Exploration & Production ETF (XOP): 80.7%
- the Alerian MLP ETF (AMLP): 65%
US crude oil active futures fell 7.1% in the trailing week. These ETFs returned 2%, -0.1%, -1.4%, and 0.9%, respectively. Despite a significant degree of correlation, these energy ETFs avoided any large fall like the fall in US crude oil prices. XLE, which had the highest correlation with oil, outperformed other energy ETFs, and closed higher in the trailing week.
In the trailing week, AMLP, XLE, XOP, and OIH had correlations with natural gas active futures of 65.7%, 56.4%, 56%, and 51.3%, respectively. Natural gas active futures fell 8.8% during the same period. Like oil prices, these energy ETFs were also insulated from the fall in natural gas prices to a certain degree.
Energy ETFs had the following correlations with the S&P 500 Index in the trailing week:
- XLE: 58.2%
- AMLP: 52.7%
- XOP: 48%
- OIH: 42.4%
The S&P 500 Index (SPY) rose 2% during this period. Given these correlations and returns, compared to the bearishness in energy commodities, the broader market has a significant influence on these energy ETFs. The recovery in the S&P 500 Index (SPY) might have insulated these energy ETFs from oil and natural gas’s fall.