April 25, 2013
/PRNewswire/ -- S&P Dow Jones Indices announced today the launch of the S&P GSCI Risk Weight which measures the S&P GSCI on a risk weighted basis. The Index takes into account the contribution of each commodity sector to the overall index risk while seeking to minimize the variance of the risk contributions from all of the commodity sectors.
The five sectors in the S&P GSCI Risk Weight - energy, industrial metals, precious metals, agriculture, and livestock - are the same as the sectors in the S&P GSCI. The risk contribution from each sector is calculated using its covariance, as defined by its volatility and correlation with other sectors. In order to avoid concentration risk, the maximum sector weight is capped at 33% and any excess is redistributed to the remaining sectors based on their risk contribution.
"The S&P GSCI Risk Weight allows us to measure the commodities beta provided by the S&P GSCI with a focus on a balanced risk contribution from each sector," says
, Head of Commodity Indices at S&P Dow Jones Indices. "This index facilitates access to broad-based commodities with a modified weighting scheme centered on risk and serves as a benchmark to risk based strategies."
The launch of the S&P GSCI Risk Weight expands the S&P GSCI family. The S&P GSCI® is the first major investible commodity index. It is one of the most widely recognized benchmarks that is broad-based and production weighted to represent the global commodity market beta.
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SOURCE S&P Dow Jones Indices