Non directional_jrg

8/7/2019 Non directional_jrg

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-N o n D ire ctio n a l Tra d in gS tra te g y in C o m m o d ity

Futures m arket

--Ratio Analysis


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Agenda

Objective

Approach

Process Learnings


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Objective

Ratio Analysis of commodity pairs Forecast of prices based on

seasonality

What is Ratio Analysis It is analysis of movement of ratio values

between two commodities, which havegood price correlation.


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Statistical Tools used Mean

Standard Deviation

Correlation Trend AnalysisData used

Daily price data of Gold, Silver, Crudeoil, Zinc and Lead of COMEX, NYMEXand LME is taken for study.


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v Commodity pairs selected for

Ratio Analysis

Gold/Silver

Gold/crude

Zinc/Lead


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Findings of thestudy


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Gold/Silver

Range Count Weights

100-80 894 .13

80-60 3583 .50

60-30 2729 .37

Total 7206 1

/ /To ta l n u m b e r o f ra tio s ca lcu la te d in th e p e rio d 0 1 0 7 1 9 8 2/ / :to 3 0 0 4 2 0 1 0 7206

- ( ).Values to look at for the period 1982 2010 up to May: .Correlation is 0 955Values Date:Maximum .101 06 / /22 02 1991

:Minimum .32 17 / /31 05 1983 Average : .64 82 / /08 09 2004


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Most of them i;e of about 50% are in the range of80-60

There after 37% in the rangeof 60-30

and only 13 in the range of80-100.

Or 65% of ratios are in interval [78, 51] ratio

levels, 30% in [91, 39] excluding the range of [78,51] and rest 5% in the range of [104, 26]. (ByNormal Distribution)

(Average mean)

.64 81554582

.Std Dev .13 19206727

Correlation .0 007530981


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Seasonality in the Ratio

movement


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Gold/crude

Total number of ratios calculated in the period 30/03/1983 to30/04/2010: 6797

Range Count Weights

35-25 515 .08

25-15 2839 .42

15-05 3443 .5

Total 6797 1

- ( ) .Values to look at for the period 1982 2010 up to May: .Correlation is 0 8046

Values Date:Maximum .32 45 / /25 07 1986 :Minimum .6 172 / /30 08 2005 Average : .15 66 / /12 05 2009


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:Standard Deviation .5 72

,So the Normal distribution says % [ . , . ] ,65 of ratios are in interval 9 94 21 38 ratio levels % [ , ] [ . , . ]30 in 5 27 excluding the range of 9 94 21 38 and

% [ , ].Rest 5 in the remaining of 4 32


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Movement


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Zinc/Lead

Total number of ratios calculated in the period 30/03/1983to 30/04/2010: 2230Range Count Weights

3.5-2.5 169 .08

2.5-1.5 891 0.40

1.5-0.5 1169 .52

Total 2230 1

- ( ) .Values to look at for the period 2001 2010 up to May: .Correlation is 0 701

Values Date:Maximum .3 5 / /2 6 2006 :Minimum . / /0 74 31 10 2008 Average : .1 5 / /14 11 2003


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:Standard Deviation .0 53

,So the Normal distribution says

% [ . , . ] ,65 of ratios are in interval 4 03 2 97 ratio levels % [ . , . ] [ . ,30 in 4 56 2 44 excluding the range of 4 03

. ]2 97 and % .Rest 5 in the remaining


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movement


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Analysis on Gold

Seasonality andCorrelation


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( )Correlation Matrix Gold2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

2000 1 - .0 611 - .0 552 - .0 51781 - .0 39931 - .0 56538 - .0 53579 - .0 63735 .0 64557 - .0 58044 - .0 611622001 - .0 610994645 1 .0 604561 .0 656606 .0 235386 .0 556331 .0 193053 .0 535344 - .0 52361 .0 541532 - .0 096642002 -.0 552000057

.0 60456

1 .0 610502

.0 275555

.0 615356

.0 555952

.0 655509

-.0 42017

.0 663792

.0 3178332003 - .0 517809206 .0 65661 .0 610502 1 .0 605702 .0 812229 .0 200556 .0 776072 - .0 66381 .0 820235 - .0 533082004 - .0 399313232 .0 23539 .0 275555 .0 605702 1 .0 76845 - .0 12706 .0 74332 - .0 53712 .0 711699 - .0 122342005 - .0 565381 .0 55633 .0 615356 .0 812229 .0 76845 1 .0 145429 .0 896176 - .0 60066 .0 883049 .0 3048862006 - .0 535791552 .0 19305 .0 555952 .0 200556 - .0 12706 .0 145429 1 .0 278454 - .0 24038 .0 269934 .0 5904892007 - .0 63735189 .0 53534 .0 655509 .0 776072 .0 74332 .0 896176 .0 278454 1 - .0 67474 .0 91236 .0 1902412008 .0 645570105 -

.0 5236-.0 42017

-.0 66381

-.0 53712

-.0 60066

-.0 24038

-.0 67474

1 -.0 65106

-.0 073562009 - .0 580441237 .0 54153 .0 663792 .0 820235 .0 711699 .0 883049 .0 269934 .0 91236 - .0 65106 1 - .0 337552010 - .0 611619543 - .0 0966 .0 317833 - .0 53308 - .0 12234 .0 304886 .0 590489 .0 190241 - .0 07356 - .0 33755 1


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Correlation from 1983-2010

Correlation from 1983-2010 0.536

Correlation from 1983-2000 -0.55






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Analysis on Silver



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( )Correlation Matrix SIlver2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

2000 1 .0 5323 - .0 05602 - .0 75372 - .0 330 56 - .0 75935 - .0 64705 - .0 36714 .0 756375 - .0 8203 - .0 527 682001 .0 5323 1 -.0 15557

-.0 21118

-.0 327 74

- .0 2785 -.0 52345

-.0 08771

.0 28404 -.0 42683

-.0 160 762002 - .0 05602 - .0 15557 1 - .0 17088 - .0 389 84 - .0 0408 .0 090616 - .0 16482 .0 32344 - .0 11872 .0 388 0752003 - .0 75372 - .0 21118 - .0 17088 1 .0 186 43 .0 661195 .0 417277 .0 299954 - .0 79362 .0 682543 .0 088 9972004 - .0 33056 - .0 32774 - .0 38984 .0 18643 1 .0 419578 .0 147485 .0 430986 - .0 3396 .0 331428 .0 091 7242005 - .0 75935 - .0 2785 - .0 0408 .0 661195 .0 419 578 1 .0 475998 .0 659169 - .0 61428 .0 769944 - .0 146 382006 - .0 64705 - .0 52345 .0 090616 .0 417277 .0 147 485 .0 475998 1 .0 282225 - .0 40362 .0 516325 .0 438 9722007 - .0 36714 - .0 08771 - .0 16482 .0 299954 .0 430 986 .0 659169 .0 282225 1 - .0 3953 .0 470158 - .0 399 512008 .0 75637

5.0 28404 .0 32344 - .0 79362 - .0 3396 - .0 61428 - .0 40362 - .0 3953 1 - .0 82709 - .0 101 682009 - .0 8203 - .0 42683 - .0 11872 .0 682543 .0 331 428 .0 769944 .0 516325 .0 470158 - .0 82709 1 - .0 622 962010 .0 055868 - .0 00544 .0 075878 - .0 0224 - .0 027 76 - .0 15186 .0 208399 - .0 38161 .0 227997 - .0 48046 1


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Analysis on Crude Oil



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Analysis on Zinc



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Correlation Matrix for Zinc prices for years 2003-2010

2003 2004 2005 2006 2007 2008 2009 2010

2003 1 0.492038 0.863948 0.759289 -0.80292 -0.86415 0.859718 -0.43271

2004 0.492038 1 0.687414 0.200846 -0.46527 -0.19323 0.232277 -0.35092

2005 0.863948 0.687414 1 0.643016 -0.8721 -0.71468 0.761061 -0.31438

2006 0.759289 0.200846 0.643016 1 -0.61641 -0.89231 0.911504 -0.04399

2007 -0.80292 -0.46527 -0.8721 -0.61641 1 0.742409 -0.76173 0.547492

2008 -0.86415 -0.19323 -0.71468 -0.89231 0.742409 1 -0.95736 -0.05133

2009 0.859718 0.232277 0.761061 0.911504 -0.76173 -0.95736 1 0.425818

2010 0.378025 0.029187 0.460089 0.358852 -0.37826 -0.50802 0.625348 1


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Analysis on Lead



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Correlation Matrix for Lead prices for years 2003-2010

2003 2004 2005 2006 2007 2008 2009 2010

2003 1 0.754293 0.586407 0.842811 0.618165 -0.82251 0.825766 -0.49611

2004 0.754293 1 0.333331 0.535279 0.642643 -0.59758 0.686711 -0.379862005 0.586407 0.333331 1 0.621727 -0.06003 -0.33779 0.286524 -0.23312

2006 0.842811 0.535279 0.621727 1 0.39389 -0.55943 0.629375 -0.6013

2007 0.618165 0.642643 -0.06003 0.39389 1 -0.73411 0.856256 -0.11006

2008 -0.82251 -0.59758 -0.33779 -0.55943 -0.73411 1 -0.89435 -0.1947

2009 0.825766 0.686711 0.286524 0.629375 0.856256 -0.89435 1 0.013135

2010 -0.09872 -0.35645 0.596885 -0.05976 -0.74415 0.224427 -0.41841 1


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Forecast


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Average ratio is: 67.11 Standard Deviation is: 4.2 So, 65% ratios will be in the interval

of [62.91, 71.31], 30% ratios will be in the

interval of [58.71, 75.51]

excluding theabove interval.

The rest 5% in the remaining

data.

/Gold Silver Ratio Forecast

for 2010


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Average ratio is: 13.87 Standard Deviation is: 0.43

So, 65% ratios will be in the intervalof [13.44, 14.3],

30% ratios will be in the interval

of [13.01, 14.73]excluding the above interval. The rest 5% in the remaining

data.

/Gold Crude Ratio Forecast for

2010


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Payoff - ( : ) (Buy Gold sell Silver 1 2 Kilo).0 6 .0 61 .0 62 .0 63 .0 649898 .0 66 .0 67 .0 68 .0 6929200 -138200 -54500 -39900 -25300 - .772 198 18500 33100 47700 62300

29250 -138200 -54475 -39850 -25225 - .655 198 18650 33275 47900 6252529300 -138200 -54450 -39800 -25150 - .538 198 18800 33450 48100 62750

29350 -138200 -54425 -39750 -25075 - .421 199 18950 33625 48300 62975

29420 -138200 -54335 -39570 -24805 0 19490 34255 49020 6378529500 -138200 -54350 -39600 -24850 - .70 1998 19400 34150 48900 63650

29550 -138200 -54325 -39550 -24775 .46 79986 19550 34325 49100 63875

29600 -138200 -54300 -39500 -24700 .163 7995 19700 34500 49300 64100

29650 -138200 -54275 -39450 -24625 .280 7992 19850 34675 49500 64325

/P a y of f M a t r i x f or G ol d S i l v e r r e tu rn s f orc h a ng e i n t h e r at io b y 1 p o i n t


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Payoff - ( : ) (Buy Gold sell Silver 5 6 mini).0 6 .0 61 .0 62 .0 63 .0 649898 .0 66 .0 67 .0 68 .0 69

29200 -73400 -58800 -44200 -29600 - .548 878 14200 28800 43400 58000

29250 -73400 -58775 -44150 -29525 - .424 133 14350 28975 43600 5822529300 -73400 -58750 -44100 -29450 - .299 388 14500 29150 43800 58450

29350 -73400 -58725 -44050 -29375 - .174 643 14650 29325 44000 58675

29420 -73400 -58690 -43980 -29270 0 14860 29570 44280 5899029500 -73400 -58650 -43900 -29150 .199 5921 15100 29850 44600 59350

29550 -73400 -58625 -43850 -29075 .324 3372 15250 30025 44800 59575

29600 -73400 -58600 -43800 -29000 .449 0823 15400 30200 45000 59800

29650 -73400 -58575 -43750 -28925 .573 8273 15550 30375 45200 60025

/P a y of f M a t r i x f or G ol d S i l v e r r e tu rn s f orc h a ng e i n t h e r at io b y 1 p o i n t


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Port folio curve for the Riskand Return by using the Modern

.Portfolio theory

The portfolio consists of Crude

, .Oil Gold and Silver


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Thank You

Non directional_jrg

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