Roll vs Spread

1 Introduction

Following the results of the Sugar Spread and Curve Structure post we determine similar plots that show the returns and roll yields of a collection of different inter-commodity spreads we are interested in. We do not share the roll schedule here, but the sizing can be found in the Relative Sizing post. In all the plots below we take the natural logarithm of the value of a USD 1 investment at the start of each timeseries. The reason for this is to linearise the cummulative return series. Since the Roll Yield is a linear chaning quantity it makes more sense to compare it with the linearised cummulative returns. Note that we did not take any costs or slippage into account in producing the values of the USD 1 investments.

2 AC vs AK

3 BO vs IJ

4 BO vs SH

5 C vs CA

6 C vs CT

7 C vs CUA

8 C vs DL

9 C vs EP

10 C vs FC

11 C vs KW

12 C vs LC

13 C vs LH

14 C vs MW

15 C vs RR

16 C vs S

17 C vs SB

18 C vs W

19 C vs YW

20 CC vs QC

21 CL vs CO

22 CO vs CL

23 China RS crush

24 China S crush

25 DA vs CHE

26 DF vs KC

27 EP vs CA

28 HO vs BO

29 HO vs XB

30 IJ vs RS

31 KO vs BO

32 KO vs PAL

33 KO vs SH

34 KW vs CA

35 KW vs MW

36 KW vs RR

37 LH vs LC

38 PAL vs SH

39 PAL vs ZRO

40 RS crush

41 RS vs BO

42 RS vs KO

43 S vs AK

44 SB vs CB

45 SB vs DL

46 SB vs QW

47 SH vs ZRO

48 SM vs AE

49 SM vs S

50 W vs CA

51 W vs KW

52 W vs MW

53 W vs S

54 XB vs CUA

55 XB vs DL

56 XB vs SB

57 YW vs WZ

58 ZRR vs AE

59 cattle roi

60 crack 321

61 crack 532

62 crush

63 Remarks

These images are just a quick reference guide to have a birds eye view of the influence of the roll yield on the return of an inter-commodity spread. Througout we assume a long position in the second commodity. In the case where the spread is made up of a linear combination of the prices of three commodities we assume a long position in the crack. For example, in the case of the cattle roi we have LC, FC and C. Here we assume a long position in FC + C and a short in LC. Similarly, for crack321 consisting of CL, XB and HO, we assume a long position in XB + HO and a short in CL.

Mauritz van den Worm
Portfolio Manager and Quantitative Researcher

My research interests include the use of artificial intelligence in managing commodity portfolios