Exchange traded funds that invest in Canada have benefited from the move higher in commodities prices due to the country’s strong presence in natural resources and energy markets.

The ETFs have been supported by solid third quarter profit at major oil companies, the European Central Bank rate cut and hopes the Greek bailout will survive. [ETF Chart of the Day: Canada]

Commodities have rallied after the European Central Bank decided to cut the benchmark lending rate to 1.25% to help alleviate the Eurozone debt crisis. [Canada ETF Falls With Gold Miner Stocks]

Major Canadian oil companies such as Canadian Natural Resources have led the energy sector higher on healthy third quarter profits. The company gained 40% in third quarter profit and analysts are calling for a 17% rise in profit in 2012 for the company.  [Using Single-Country ETFs to Invest in Sectors, Diversify]

According to the Petroleum Services Association of Canada, stronger oil prices helped to project Canadian oil and natural gas drilling prospects up 10% for next year.

The iShares MSCI Canada Index (NYSEArca: EWC) can be played as an oil and energy proxy, as well as a diversification fund for international stock exposure. The fund managed a 15% gain in October. The oil industry represents almost 20% of the fund. Canada has managed to outperform international equities this year.

“Over half of EWC’s holdings are either materials or energy companies,” Morningstar analyst Samuel Lee writes in a profile of the Canada ETF. “Investors already loaded up on commodities and bearish U.S. dollar bets should be wary of doubling down on them with this fund. Unusually for a developed nation, Canada is a major commodity exporter. Its confirmed oil reserves, including oil sands, are second only to Saudi Arabia, and it’s a major producer of minerals, natural gas, and agricultural commodities.” [Energy ETF Rallies 50% from October Low]

For small-cap stocks, investors can take a look at IQ Canada Small Cap ETF (NYSEArca: CNDA).

iShares MSCI Canada Index

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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