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COMMODITY QUANT STRATEGY SUMMARY

Overview

This document outlines the current status and performance of the BNPP-TIF commodity quant strategy as of 24 August 2018. The strategy focuses on identifying and capitalizing on bull trends in various commodities, with a particular emphasis on energy and metals. The strategy uses a combination of trend-following models and contrarian strategies to generate trading signals.

Core Content

• The BNPP-TIF model tracks eight commodities: gold, WTI crude oil, Brent crude oil, copper, nickel, zinc, aluminium, and SPGS Energy.
• The model has been in a bull trend for several commodities, with some showing increased strength.
• The strategy is based on the principle that "the trend is your friend," emphasizing the importance of trend-following in commodity trading.
• The strategy includes both long and short positions depending on the trend analysis of each asset.

Main Trends and Positions

• Gold: In a bull trend with a current probability of 100%. The model has a strong historical performance with a total PnL of 218.1%.
• WTI Crude Oil: In a bull trend with a probability of 84.7%. The model has a high total PnL of 277.4% and continues to show a bull trend.
• Brent Crude Oil: In a bull trend with a probability of 84.1%. The strategy is opening a long position in Brent crude oil (COX8) with an allocation of 26 contracts at USD 76.56/bbl.
• Copper: In a bull trend with a probability of 94.4%. The bull trend has been weakening slightly over the last month.
• Nickel: In a bull trend with a probability of 67.0%. The model holds a long position in Nickel.
• Zinc: In a bull trend with a probability of 76.1%. The model holds a long position in Zinc.
• Aluminium: Trendless with a probability of 51.3%. The model is currently long since 27 July.
• SPGS Energy: In a bull trend with a probability of 74.8%. The energy sector has turned to a bull trend after a trendless period.

Key Information

• TIF Model Overview: The BNPP-TIF model is designed to take advantage of strong serial correlation in commodity price returns. It complements the $\mathsf{MarFA}^{\mathsf{TM}}$ and multifactor models, which focus on contrarian strategies.
• Current Positioning:
  • Long positions: Nickel, Zinc, WTI crude oil.
  • Short positions: Nickel, Brent crude oil.
  • Factor model is long XAG/XAU, Silver, and Zinc.
• Performance Metrics:
  • Gold: Bull trend, PnL last 3M: -2.1%, PnL last 6M: -2.1%, PnL last 12M: -2.1%.
  • WTI Crude Oil: Bull trend, PnL last 3M: -2.9%, PnL last 6M: 12.1%, PnL last 12M: 28.5%.
  • Brent Crude Oil: Bull trend, PnL last 3M: -1.7%, PnL last 6M: -4.8%, PnL last 12M: 20.2%.
  • Copper: Bull trend, PnL last 3M: -7.6%, PnL last 6M: -7.6%, PnL last 12M: 5.5%.
  • Nickel: Bull trend, PnL last 3M: -0.9%, PnL last 6M: -7.3%, PnL last 12M: -29.5%.
  • Zinc: Bull trend, PnL last 3M: -14.2%, PnL last 6M: -24.2%, PnL last 12M: 1.0%.
  • SPGS Energy: Bull trend, PnL last 3M: 3.6%, PnL last 6M: -0.9%, PnL last 12M: 12.7%.
  • Aluminium: Trendless, PnL last 3M: 0.7%, PnL last 6M: -11.3%, PnL last 12M: -20.0%.

Recent Signals

• The strategy is opening a long position in Brent crude oil once it shows a bull trend again.
• The trend in Aluminium has been closed, indicating a shift from bull to bear or neutral.
• The model is showing a return to neutral for Aluminium and a continuation of bull trends for other commodities.

Contacts

• Gabriel Gersztein: Head of GM Latam Strategy, +55 11 3841 3421, gabriel.gersztein@br.bnpparibas.com
• Samuel Castro: FX & IR Latam Strategy, +55 11 3841 3492, samuel.castro@br.bnpparibas.com
• Luca Maia: FX & IR Latam Strategy, +55 11 3841 3447, luca.maia@br.bnpparibas.com
• Andre Digiacomo: FX & IR Latin America Strategy, +55 11 3841 3445, andre.digiacomo@br.bnpparibas.com

Legal Notice

• This document is a marketing communication and not investment research.
• It is intended for Professional Clients and Eligible Counterparties under MiFID II.
• The information is based on public sources and may not be independently verified.
• BNPP does not provide investment, financial, legal, or tax advice.
• The performance data is based on back-testing and is for illustrative purposes only.
• The document may not be reproduced or distributed without prior written consent.