Correlation of Chinese Commodity Futures Price During the Global Commodity Price Boom : A Complex Network Perspective

This paper aims to study the correlation structure, key commodity and cluster characteristics of China's commodity markets during the period of the 2020-2021 global commodity price boom via applying Empirical Mode Decomposition (EMD) of commodity futures price indices to obtain high-frequency volatility components and low-frequency trend components, and constructing Minimum Spanning Tree (MST) and Hierarchical-clustering Tree (HT) to establish a connection network within the futures market system. From the perspective of network centrality, the 'leading' index of China's commodity futures market is proposed, We find that coking coal, rebar and PTA were the key nodes for the commodity futures price correction during the period of the surge in commodities since the second half of 2020 and after the intensive regulation. The cluster characteristics of commodities are related to the classification of traditional industries and energy and ferrous metals are the most important commodity categories. After the introduction of regulatory measures for the commodity futures prices boom, the relevance of the futures market rose first and then declined. The key node switched from energy and ferrous metals to chemical products such as methanol and polypropylene after policy-intensive regulation. We further construct the commodity 'leading' index which has an ideal correlation with the Wenhua Commodity Index and excellent information compression properties. The results of this paper not only provide new enlightenment for regulators to monitor market risks, but also for investors to establish data-driven risk management strategies