Tuesday, June 26, 2012

Natural Gas Futures vs $UNG



In response to an earlier tweet where I said " $UNG doesn't correlate well bc of how contract rolls. Look at these but their charts are mess $APC $DVN $EOG $SWN $RRC" 


Correlation was a poor choice of words and mislead some readers. What I meant or should have said is that Contango (higher prices for longer-dated futures contracts) destroys UNG value as it rolls from a lower-priced maturing contract into the next longer-term higher priced contract. Thus returns are not correlated. 


Best of Trading 


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