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Why hedging with commodities goes against the grain

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April 08, 2014 against the grain, business, commodities, commodity, correlation, correlation equity commodities, equities, equity, equity falls, equity market, equity strategy, finance, hedge, hedge funds, hedging, how to invest, investing, markets, morningstar, news, portfolios, saxo, saxo tv, share falls, tradingfloor.com, video
In the past few years, there's been a new and marked correlation between commodity and equity markets. Gone, it seems, are the days when commodity funds were the ideal way to diversify investor portfolios. Until the early 2000s, commodity funds had a near-zero correlation to US stocks. 
Research by Morningstar shows there's been a concerted investment into commodity funds as investor assets have grown in recent years. That's led to a 0.5 percent correlation with equities, a level that's likely to be maintained so long as investors are still interested in commodities.