Using the Omega Ratio for Optimal Asset Allocation in Commodities

Živkov, Dejan and Manić, Slavica and Glamočlija Gajić, Marina (2025) Using the Omega Ratio for Optimal Asset Allocation in Commodities. . Economic Computation and Economic Cybernetics Studies and Research, 59 (1). pp. 293-307. ISSN 0424-267X

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Abstract

This paper calculates the Omega ratio of 16 commodities from four classes – agriculture, precious metals, industrial metals, and energy. The analysis considers two subsamples and five different threshold levels, taking into account individual commodities as well as optimised portfolios. Palladium has the best reward-to-risk ratio in the pre-crisis period, while all grains recorded high Omega in the crisis period, and soybean stands out as the best of them. Specific market circumstances caused these results in the pre-crisis and crisis periods. As for the optimised Omega portfolios, the precious metal portfolio proved to be the best in the pre-crisis period, while the agricultural commodity portfolio has the highest Omega in the crisis period.

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