10-08-2021, 10:45 PM
Need help calculating portfolio variance of commodities portfolio
<!-- SC_OFF --><div class="md"><p>Hi,</p> <p>I'm trying to calculate the portfolio variance of a nat gas portfolio. Where I'm struggling is using the NYMEX forwards with a basis price (e.g. Chicago). Need help calculating the VAR if two legs of an asset make up the weighting of one asset in a portfolio. For example: In layman's terms, the Chicago physical forward pricing is the NYMEX + the Chicago basis, which will together make up one asset in the physical gas portfolio. Can I just add the two legs together and consider this as one price, because I don't intend to have one without the other? Say my second asset is the NYMEX + Michigan Basis and I do the same thing to get a Michigan price. The covariance would account for the underlying NYMEX in both assets, correct?</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/xNyxx"> /u/xNyxx </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/q44z34/need_help_calculating_portfolio_variance_of/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/q44z34/need_help_calculating_portfolio_variance_of/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>Hi,</p> <p>I'm trying to calculate the portfolio variance of a nat gas portfolio. Where I'm struggling is using the NYMEX forwards with a basis price (e.g. Chicago). Need help calculating the VAR if two legs of an asset make up the weighting of one asset in a portfolio. For example: In layman's terms, the Chicago physical forward pricing is the NYMEX + the Chicago basis, which will together make up one asset in the physical gas portfolio. Can I just add the two legs together and consider this as one price, because I don't intend to have one without the other? Say my second asset is the NYMEX + Michigan Basis and I do the same thing to get a Michigan price. The covariance would account for the underlying NYMEX in both assets, correct?</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/xNyxx"> /u/xNyxx </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/q44z34/need_help_calculating_portfolio_variance_of/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/q44z34/need_help_calculating_portfolio_variance_of/">[comments]</a></span>Kind Regards R