Blog Archives

NG "roll returns" – inflection point?

November 5, 2018
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NG "roll returns" – inflection point?

After more than a decade of consistent losses from rolling a long NG position, the cumulative return has been positive for the past 12 months.  This has only occurred briefly during the 'polar vortex' of early 2014 and during the 2008 commodities 'super cycle' peak. For years, long only positions in NG have experienced losses on average in the last...

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Modeling Residential Electricity Usage with R – Part 2

July 8, 2013
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Modeling Residential Electricity Usage with R – Part 2

(This article was first published on Commodity Stat Arb, and kindly contributed to R-bloggers) I can’t believe it has been nearly 6 months since I last posted.  Given the sustained heat it seemed like a good idea to finish off this subject. As hinted at in my last post, temperature is the missing variable to make sense of Residential...

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Modeling Residential Electricity Usage with R

January 30, 2013
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Modeling Residential Electricity Usage with R

Wow, I can’t believe it has been 11 months since my last blog posting!  The next series of postings will be related to the retail energy field.  Residential power usage is satisfying to model as it can be forecast fairly accurately with the right inputs.  Partly as a consequence of deregulation there is now more data more available than...

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Futures price prediction using the order book data

March 5, 2012
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Futures price prediction using the order book data

It has been a couple of months since my last post; busy with lots of projects.I had some fun playing around with data from Interactive Brokers API.  It turns out that it is relatively easily to get hold of the raw market data relating to both trades and order book changes for CME/NYMEX commodity futures.  For the purposes of...

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NG Spreads returns, a reliable earner.

December 1, 2011
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NG Spreads returns, a reliable earner.

I was reminded recently it has been a while since my last posting.  So here is a quick analysis of a strategy that works pretty well.Much has been written on the changes to the NG market structure over the past few years; the influence of financial investors and the impact of new technologies.  One thing that hasn’t...

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Retail Commodity Investors – A Bleeding Indicator?

May 10, 2011
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Retail Commodity Investors – A Bleeding Indicator?

Retail Commodity Investors – A bleeding indicator?With the recent “flash crash” in commodities it seemed like a good time to delve into the question of how retail investors react to commodity prices and their investment flows into and out of commodities.  Some of the single commodity investment pools (a.k.a. ETFs) publish their daily issuances and redemptions data. ...

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Commodities vs. commodity stocks

May 2, 2011
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Commodities vs. commodity stocks

Just got back from a couple of months vacation in NZ so brief posting this month. Another common field of mean reversion analysis relates to commodities and commodity related stocks.  In this analysis, I compare the prompt month crude oil price, CL1 to the price of XOP, an ETF that invests in oil & gas exploration &...

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Platinum – Palladium relationship

January 11, 2011
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Platinum – Palladium relationship

Ok, so they start with the same letter and are part of the same group of elements, but why are they so often proposed as pairs in trading strategies?  As a spread strategy they look especially tempting right now:Palladium outshone Platinum for most of 2010.  Is the run over?  Or will it go further?Cointegration testingBefore attempting to...

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Oil – Natural Gas Cointegration – turning point?

December 22, 2010
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Oil – Natural Gas Cointegration – turning point?

Much has been written and said about the NG / CL relationship.  For most of 2009 pundits touted NG as historically underpriced relative to CL.  As always the reality is more complex.  Comparing a largely domestic USD commodity with an internationally traded commodity increasingly consumed by emerging markets has inherent risks.More subtly, most commentators ignore the roll...

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Its 9am, do you know what the traders are thinking?

November 17, 2010
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Its 9am, do you know what the traders are thinking?

Roll proposed a model for the bid-ask spread that was based on first-order serial correlation.  His empirical tests were based on daily and weekly frequency equity data, and based on the results he concluded there were informational inefficiencies (or that there was very short term non-stationarity in expected returns).More recently this model has been applied to high frequency...

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