Does UNG correlate to Natural Gas Prices

I’ve had a few phone calls on my radio show the last couple of days asking if UNG is still the best way to play natural gas.  And some have said there have been articles written about the fact that natural gas doesn’t correlate to UNG (the ETF for the commodity).  Below, I’ve shown a picture of the natural gas and UNG year to date.  You can see they are off a couple of percent but overall they are extremely correlated.

natural gas vs ung

Then there’s the question on whether or not you should buy it.  I still own it but I’m using it as a pairs trade with oil (short oil, long natural gas).  At the present time, I’ve covered my oil short and locked in profits and I just remain long natural gas.  But, I believe I’ll be re-entering the oil short at some point.

If you can’t watch natural gas on a daily basis, then this fund isn’t for you.  We know the CFTC is discussing many options with various contract limitations, etc.  That will add volatility but overall if nat gas goes up, I still prefer to own UNG.

Another option for those that like natural gas but are worried about the mechanics of UNG, you can buy FSNGX, which is a Fidelity fund that is a basked of natural gas companies.  It’s a managed fund and will get you long that sector.

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2 Responses to “Does UNG correlate to Natural Gas Prices”


  1. 1 Priyankar Datta July 31, 2009 at 8:33 am

    I have been looking at UNG for quite sometime and I think you are absolutely correct.

    However do you know of other factors which might be affecting it, Spot Market etc ??

    • 2 keggerss August 2, 2009 at 9:03 am

      I think the main thing right now affecting UNG is the CFTC’s talk about limiting contracts, etc. It’s adding extra volatility to nat gas. Still researching other pros/cons of using UNG to play nat gas. But, I think overall it’s still the best way and the best correlation if you think natural gas is heading up.


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