Not long ago, it was inconceivable to many that commodity returns would be correlated to stocks and bonds. In recent times it has become inconceivable that they are not. The new reality appears to be a so-called market of one, with commodities moving in the same direction as stocks and bonds. However, some suspect current high levels of correlation are less a new paradigm and more an aberration.
In their seminal study, Yale’s Gorton & Rouwenhorst (2005) constructed an index of commodity futures