Strategy for Oil and Oil Stock Investments
Introducing a Strategy for Alpha Generation and Hedging in Oil Markets
On this website we introduce a strategy for alpha generation and hedging in oil markets. We provide a high degree of transparency, showing average weekly exposure for oil and oil stocks. Also, users can apply the signals to own time series (e.g. portfolios or the energy/oil allocation within).
Strategy Signals and Exposure
The table shows the signals delivered by the strategy. To help evaluate the signal quality, the resulting average exposure in any week is displayed.

The column on the right shows the corresponding return of internally created and calculated custom indices, depending on your selection either for oil or oil stocks.
Signals for oil and for oil stocks are available from summer 2007 until last week.

Select time periods/market events for oil or oil stocks. To see all data, click the first or the second box for oil and oil stocks, respectively.

Simulate Portfolios & Apply Signals
The simulation allows to calculate a portfolio consisting of any or all the time series provided. You can add your own strategies / time series, e.g. the daily NAV of your portfolio, close prices of a fund/ETF or a stock.

Also, you can apply the signals for oil or oil stocks on your time series. The corresponding risk and return figures are shown.

Time series of two oil indices that we calculate internally are provided. These should roughly display price movements in oil and oil equity markets. The other two startegies provided show the results of signals being applied to these indices. Although short signal’s return contribution is significant, only long or cash positions have been considered for the two strategies shown here.


No Commodity / Oil Bias
QAP is a consultancy focused on asset management and digitalization. For manager and strategy selection as well as for custom factor time series we are analyzing energy markets, especially oil. We are not experts in the commodity area and we are not forced to have an opinion on the direction of oil.

This freedom materializes in a strategy which delivers long and short signals only when the model shows sufficient probability for being correct. No signal (neutral) might be delivered over longer time periods.
Starting Point
Why we care about oil
Oil (energy in general) is the most important commodity/input for products and services. As such, its supply has tremendous effects on prices, inflation, and the valuation of assets.

For our consulting business, e.g. analytics of funds/ETFs or strategies, at least implicitly, energy prices are often one of the main factors in models to evaluate strategy philosophy and scenarios.

Asset Allocation
Commodities are a vital part in non-traditional segments of strategic asset allocations (SAA).

In an persisting low interest environment, active strategies as satellites or within TAA are more and more seen as necessary alternatives to pure beta exposure and/or as part of the shift into alternative investment sources of return.

Alpha Strategy
The oil strategy delivers the three signals long, short, and neutral. Either positions in a given asset allocation can be established or a distinct active strategy implements the signals.

Hedging Beta Exposure
Existing beta exposure to oil or oil stocks can be hedged based on the signals. The implementation as a weighting scheme is a closely related use case.

Model Diversification / Second Opinion
The model is based on a top down view on asset allocation flows and probably best described as “behavior-driven”. It can serve as a diversification to strategies that rely on fundamentals, on technical indicators or are higher frequency models, e.g. of commodity experts.

Related Topics
Global macro opportunities can be spotted for topics that are related to the price of oil.

For determining the direction of the price of oil it would be optimal to know all supply and demand parameters, know the elasticity of demand and supply as well as the motivation (current allocation) of the potential buyers and sellers, the expected supply and demand parameters. This data and the resulting information is not available (to us). Therefore, we make use of proxies from which we can derive the behavior of market participants and conclude effects on the direction of oil.

No Forecasts
The model does not aim to forecast oil price ranges, let alone target prices.

Optimal: We have all Information


Model: We use Proxies


High Conviction
The model looks at four market players. A multi factor framework incorporates asset prices and asset flows that are assigned to these players. No single factor/factor group can solely determine the model’s signal. A high conviction setup is required for a signal

1) Countries: Economies that rely on energy/oil either as producers or consumers. The destiny of the country’s economy is closely related to energy prices.

2) Consumers: Corporates, countries and derivatives producers need to hedge their exposure to oil prices.

3) Oil Industry Suppliers: Companies that offer products and services to certain segments of the oil industry suffer from lower oil prices.

4) Asset Allocators: Investors shift or just rebalance their allocations triggered through common allocation and/or risk models.

Strategy Summary
  • Fully systematic, rules based
  • Robust: no change in parameters since start date of historical and live simulation
  • Low frequency: weekly or daily signals
  • Independent from specific data sources: all input information is publicly available
  • News and events (e.g. OPEC meetings) completely ignored
  • No trend follower, no machine learning, no AI, no black box
  • Asymmetric return contribution: short exposure contributes most (historical outcome)
  • Open for further development and improvements
Oil Market
The strategy can be directly applied to oil futures, exchange traded products or other derivatives of oil (spot) prices, e.g. WTI, Brent.

Model Input and Diversification
The strategy’s signals can be utilized as a second opinion or a new input factor for an existing model on oil (energy or macro), serve as diversification (e.g. weight increasing/decreasing) to a mix of fundamental, technical, lower and higher frequency strategies on oil.

Time or Hedge Energy Stocks Exposure
The signals can also be applied to time exposure to energy and energy related stocks / stock baskets. A slightly adjusted version takes equity asset class specifics into account (see simulation above). The short and neutral signals can be implemented to (partly) hedge exposure to energy stocks.

Corporates: Cut Input Costs
Improve your oil/energy procurement strategy and lower input costs.

Contact Us
QAP Analytic Solutions GmbH offers a holistic consulting approach to businesses in the financial market universe. We combine qualitative and quantitative analysis of investment strategies, portfolios, managers and vehicles with strong emphasis on technological solutions.

QAP Analytic Solutions GmbH 
In den Fritzenstücker 2, 65549 Limburg, Germany
Phone: +49 (0) 6431 2842475, Email:
Company Website:

Managing Partner: Christian Schuster, CAIA 
Court of Registration: AG Limburg (Germany), Reg. No.: HRB 5312
VAT ID: DE298295346