Financialization, crisis and commodity correlation dynamics

► Commodity derivatives markets have attracted increasing investor interest over the past decade. ► Dynamic conditional correlation modelling between commodity futures and stocks indicates declining diversification benefits. ► Smooth transition models detect both sudden and gradual changes in correlation states. ► Financial state variables (VIX and financial trader open interest) drive changes in volatility and correlation. ► Breaks in correlation structure begin around the early 2000s and increase sharply during the GFC.