The days when copper and iron ore moved to a different beat and it made sense to distinguish metals from bulk commodities have gone.  Between 1980 and the...

John Robertson

PortfolioDirect

The days when copper and iron ore moved to a different beat and it made sense to distinguish metals from bulk commodities have gone.  Between 1980 and the end of 2003, the correlation between monthly average copper price levels and iron ore prices was 0.11.  The correlation between monthly movements in the two prices was a negligible 0.03.  The volatility in copper prices was twice as high as the iron ore price volatility.  With iron ore pricing arrangements swinging progressively toward daily pricing, the relationship between the risk profiles of the two commodities changed.  Iron ore price volatility tripled.  The correlation between the prices of the two commodities has leapt to 0.87.  Consequently, the two Australian mining market leaders are no longer diversified in an economic sense since the largest part of their earnings come from these two commodities.


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John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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