Roger Nusbaum
GRN strikes me as the first of its kind. As opposed to providing access to a stock market or a commodity, it instead offers exposure to a real world cost of doing business globally. As such, it seems like a real candidate for having a very low correlation to equities.
The index correlations are a bit of a surprise. It has a 0.53 correlation to the S&P 500, 0.80 to MSCI EAFE, 0.39 to DJ AIG Commodity Index Total Return and -0.58 to Lehman US Aggregate Bond Index. I would have expected, or more correctly hoped for, a lower correlation to equities. I view GRN as an alternative asset. The real world aspect of the carbon market offers the chance for price movement that is independent of equity markets and as the chart shows, the price movement can at times provide equity-like returns. The combination of equity-like returns without equity-market exposure is an appealing proposition if equity markets continue to struggle. This was what I had in mind when I wrote about Climate Exchange PLC(CXCHF Quote - Cramer on CXCHF - Stock Picks) in March. Whatever you think about the greenhouse gas issue, CXCHF has traded in its own world since that last article, and I think GRN can do the same thing. |
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