“The annualized volatility of the stocks of producers is basically the same as the futures at 28% versus 29% but for every 1% move in oil futures (up or down), the stocks only move 74 basis points as measured by beta. What is more interesting to study is how oil stocks perform versus oil futures in up and down markets. On average in a down month for oil, futures drop 6.8% versus only 4.9% for the stocks; however, when oil rises, futures rise 6.1% on average in a month but stocks only rise 4.9%,” according to Gunzberg.
Despite oil’s struggles, investors have displayed an affinity for energy ETFs this year. USO has added $821.5 million in new assets while XOP has hauled in $548.6 million in fresh investments. XLE has seen $1.55 billion of inflows.
Chart Courtesy: S&P Dow Jones Indices.