Historical relationships between the stock market and the commodity futures market, as proxied by the S&P 500 and the Commodity Futures Index, suggest that the S&P may have slightly outperformed the CFI over the 1978–81 period. In earlier years, however, the CFI clearly outperformed the S&P. Relative performances of the stock and commodities futures markets appear to be sensitive to investment horizon.

Regression analysis indicates virtually no relationship between the rates of return of the two series. Risk and return, however, increase with horizon, whereas skewness and kurtosis are generally negatively related to horizon. Investors should be aware of these factors when selecting investment horizons.

Investigation of the lead-lag relation between the two series confirms their independence. The S&P led the CFI by one day in 1969 and in 1972, while the two were instantaneously related in 1970. Data for 1973 through 1981 show complete independence, regardless of evaluation technique.

These results suggest that commodity futures contracts may be used in conjunction with an equity portfolio to help reduce risks and enhance portfolio returns. Opportunities for profitable arbitrage between the two indexes are not likely, however.