Which of the following accurately describes the investment characteristics of commodities?

Commodities typically exhibit low correlation with equities and bonds, which is a key characteristic that makes them an attractive diversifying asset in an investment portfolio. When traditional asset classes like stocks and bonds are influenced by similar economic factors and market trends, commodities often respond differently due to their unique supply-demand dynamics. For instance, commodities can be influenced by changes in weather patterns, geopolitical events, and shifts in global supply chains, allowing them to behave independently of overarching equity and fixed income trends.

This low correlation can help reduce portfolio volatility and enhance risk-adjusted returns, especially during periods when equities are experiencing significant fluctuations. By including commodities in an investment strategy, investors can benefit from their potential to perform well during inflationary periods or other economic conditions that adversely affect stock and bond markets.

In contrast, the other options fail to accurately represent the investment characteristics of commodities. For example, commodities do not tend to remain very stable during economic downturns, nor are they insensitive to business cycles; in fact, commodity prices can be quite volatile and sensitive to changes in economic conditions.