UBS Investment Bank has launched the UBS Commodities Portfolio Algorithmic Strategy System (Comm-PASS), a portfolio-based algorithmic system designed to exploit momentum in the commodity markets to generate returns through automated long and short strategies. The portfolio consists of a basket of strategies on 19 commodity futures markets from the five different commodity sectors: energy, precious metals, base metals, agriculture and livestock.
“For the last few years, commodity price volatility has been substantially greater than other asset classes, largely due to supply concerns as well as changes in global consumption and the influx of financial commodity investments,” says James Paget, co-head of EMEA structured commodity sales, UBS. “High volatility offers trading opportunities, provided that an appropriate trading strategy is implemented. We believe Comm-PASS offers investors the opportunity to generate high returns by exploiting commodity market characteristics.”
Each strategy generates long or short signals in an individual commodity, taking into account both the trend and counter-trend characteristics of specific commodities in combination with the asymmetric return distribution seen in the commodity markets. The system adjusts positions based on signals generated from current market conditions to capture new market opportunities for each commodity.
The parameters for each strategy within UBS Comm-PASS are chosen independently of the other strategies. UBS says this leads to a lower correlation between returns of individual strategies and to higher Sharpe and Calmar ratios for the overall portfolio.