Analysis of Commodity Indices in Investments

Investing in commodities can be an effective way to diversify a portfolio. One of the common methods to obtain commodity exposure is through the use of commodity indices. These indices track the performance of a basket of commodities and can provide investors with insights into commodity price movements and trends.

Describe the primary characteristics of commodity indices, discuss their benefits and limitations as investment vehicles, and explain how they can impact portfolio diversification. Provide examples to support your analysis.