Commodities Investment Risk and Return Analysis

Medium Commodities Investment Risk And Return

As an investment analyst at a hedge fund, you are evaluating the potential risks and returns of adding commodities to the fund's portfolio. You focus specifically on the historical performance of commodity investments compared to traditional asset classes like stocks and bonds, considering both correlation and long-term return patterns.

You review a report indicating that commodities can have a negative correlation with equities, which could allow for better diversification in an investment portfolio. However, you also note the inherent volatility and the potential for sharp losses in the commodity markets.

Based on this information, you must determine which of the following statements best summarizes the risk and return characteristics of commodities relative to other asset classes.

Commodities typically offer lower long-term returns than equities but provide higher diversification benefits.

Commodities have historically achieved higher returns than bonds while maintaining a similar level of risk.

Commodities are more volatile than equities, but their returns tend to be less sensitive to economic cycles.

Hint

Submitted1.6K

Correct1.3K

% Correct84%