Commodities Strategies Based On Two Factors

This paper explores trading strategies in the Chinese commodity futures market that combine momentum and term structure signals. With significant yearly alphas of 15.21% and 12.27% respectively, the momentum and term structure strategies appear profitable when implemented individually. Our combined strategy that takes both momentum and term structure signals into account produces 17.15% annualized excess returns, better than both of the single- factor strategies. This two-factor strategy can also be used to diversify the investment portfolio.