When the Baltic Dry Index (BDIY), a measure of daily charter rates to ship a variety of commodities across the globe, moves higher, ETF investors get excited about the Guggenheim Shipping ETF (NYSEArca: SEA).
On the surface, the relationship appears to make sense, but the reality is SEA is not a dry bulk shipping ETF. SEA tracks the Dow Jones Global Shipping Index. That index is a collection of dividend-paying global shipping firms, not all of which are focused explicitly on the transport of dry bulk commodities. [Shipping ETF Looks to Sail Past Resistance]
SEA holds 27 stocks and that group does NOT include day trader favorites such as DryShips (NasdaqGM: DRYS), Baltic Trading (NYSE: BALT), Diana Shipping (NYSE: DSX) and related fare. So while SEA is the ETF some investors turn to in an effort to express a view on the Baltic Dry Index, the fund provides little leverage to that index.
Still, SEA’s association with the Baltic Dry Index has been enough to drive the ETF higher by almost 7% in the past month. That time is particularly useful for examining the relationship between SEA and the Baltic Dry Index (or lack thereof). As the chart below shows, the Baltic Dry Index has plunged over the last several weeks. SEA has not and the ETF is mere pennies away from its 52-week high.