Underlying Assets in the Stock Market: Understanding, Analyzing, and Strategically Investing in 2025

The underlying assets constitute the foundation of derivative products and play a central role in the management of investment portfolios. Mastery of this concept allows investors to better understand the mechanisms of hedging, speculation, and diversification. Discover in this comprehensive guide everything you need to know about underlying assets in the stock market: definition, categories, analysis methods, concrete examples, opportunities, and risks in 2025.

What is an underlying asset in the stock market?

An underlying asset is a financial or tangible asset on which the valuation of a derivative product depends. Whether it is a stock, a commodity, a currency, or an index, the underlying asset determines the price movement of the derivative product that relies on it (options, futures, ETFs...). For example, a futures contract on the CAC 40 has the CAC 40 index as its underlying asset.

Derivative products thus allow investors to expose their portfolio to the evolution of a specific category of assets without directly holding the underlying asset. This structure plays a major role in risk management and the pursuit of performance.

Functioning of the underlying asset in derivative products

  • Options: a call or put option is based on an underlying asset and allows the purchase or sale of the latter at a price fixed in advance.
  • Futures contracts: they obligate the buyer and seller to exchange the underlying asset at a predetermined date and price.
  • Thematic ETFs and ETCs: these instruments replicate the performance of an underlying asset through various mechanisms (physical, synthetic).

Main categories of underlying assets

There are four main families of underlying assets, each presenting specific characteristics and risk profiles:

  • Stocks: shares of listed companies such as Hermès or Amazon. Stocks offer exposure to the growth of companies, with significant variations depending on financial results or economic conditions.
  • Stock indices: aggregates representing entire markets such as the French CAC 40, the American S&P 500, or the German DAX. They are widely used in passive management and arbitrage.
  • Commodities: energy (oil, gas), metals (gold, copper), agricultural products (wheat, soybeans). ETFs/ETCs on commodities allow indirect investment in these physical assets.
  • Currencies (forex): pairs such as euro/dollar or yen/dollar, primarily used for hedging against currency risk or speculating on fluctuations in global currencies.

Why are underlying assets essential for investors?

Understanding underlying assets is essential for any investor using financial products beyond simply buying stocks, especially in our environment in 2025 where active management, risk hedging, and diversification remain key challenges.

  • Diversification: by blending underlying assets with varied profiles (stocks, commodities, currencies...), the overall risk of the portfolio is better managed.
  • Risk Management: exposure to certain underlying assets through derivatives allows protection against market declines or adverse movements.
  • Global Opportunities: some markets or sectors are accessible only through derivative products on their underlying assets (e.g., agricultural commodities).
  • Leverage Effect: the structure of derivative products allows for multiplying the exposure to the underlying asset for a limited investment, while increasing the potential risk.

Analysis of Underlying Assets: Methods and Key Indicators

To invest rationally, it is advisable to use different complementary approaches adapted to the targeted underlying asset. Here are the two main methods applied in the stock market.

Technical Analysis of Underlying Assets

Technical analysis relies on the historical price data of the underlying asset and market psychology. It is frequently used to detect trends, identify support/resistance zones, and spot short-term trading opportunities.

  • Technical Indicators: MACD, RSI, Bollinger Bands... They signal overbought/oversold conditions or changes in the dynamics of the studied asset.
  • Chart Patterns: head-and-shoulders, triangles, double bottoms... They materialize trend reversals or continuations.
  • Volumes and Volatility: significant volume movements validate the strength of a technical signal, while volatility measures the extent of fluctuations in the underlying asset.

Case Study: ETF on Soybeans (WisdomTree Soybeans, SOYB)

The WisdomTree Soybeans (SOYB) is an ETF offering exposure to the global soybean market. It follows an index composed of soybean futures contracts (Bloomberg Soybeans Subindex Total Return) and aims to replicate the performance of this commodity, highly sought after by investors wishing to diversify their portfolios within agricultural assets.

  • Recent Price (November 2025): around $27.75 in London; between €21.04 and €25.55 on the Xetra exchange. On the Borsa Italiana, it closed at €21.605.
  • One-Year Performance (November 2025): the SOYB shows an annual variation around +0.3% (Xetra exchange).
  • Year-to-Date Performance: -5.96% over the first ten months of 2025.
  • One-Year Volatility: nearly 19%, which reflects a high risk characteristic of agricultural commodities.
  • Assets Under Management: close to €14 million on Xetra at the end of 2025.

Important Note: No reliable official beta ratio is published for such commodity ETFs, as there is no universal stock market index to measure its sensitivity, nor a consensus on using beta for these types of instruments. Therefore, it is preferable to base the risk study on historical volatility and perform explicit comparisons against other benchmarks (e.g., MSCI World Index, agricultural ETFs).

Underlying Fundamental Analysis

Fundamental analysis focuses on the intrinsic characteristics or external factors that determine the value of the underlying asset. Indicators and data sources vary according to the type of asset:

  • Equities: financial statements (balance sheet, income statement), revenue growth, return on equity, sector analysis, competitive positioning...
  • Indices: sector weightings, macroeconomic factors impacting overall growth, interest rates, monetary policy.
  • Commodities: global supply/demand dynamics (USDA reports, inventories, weather, agricultural policies), usage trends, geopolitical tensions.
  • Currencies: nominal and real interest rates, monetary policy, balance of payments, macroeconomic stability, political events.

In the case of soybeans, fundamental analysis would include harvest estimates in major exporting countries (Brazil, United States), demand linked to biofuel production and animal feed, the strength of the US dollar, and close monitoring of USDA reports.

Key Factors to Consider When Analyzing Underlyings

  • Liquidity: ability to buy or sell a position in the underlying without causing significant price fluctuations. The most liquid markets are generally those of large companies, major indices, or major commodities (oil, gold, soybeans).
  • Volatility Risk: commodities, especially agricultural ones, experience significant price swings due to weather, geopolitical, or logistical conditions. Technology stocks and cryptocurrencies are also highly volatile.
  • Multiplicity of Listing Places and Currencies: some underlyings (e.g., commodity ETFs) are available in multiple currencies and on different stock exchanges. It is essential to specify the listing place and currency when analyzing the price to avoid erroneous arbitrages.
  • Commissions and Management Fees: the actual profitability of an investment will also depend on fees charged by intermediaries or management companies.
  • Implicit Leverage Effect: certain derivatives inherently carry leverage, increasing both the potential for gains and the risk of loss.

Investing with Discernment: Strategies on Underlyings in 2025

Exposure to various underlyings allows for deploying a diverse range of strategies, tailored to each investor's profile, objectives, and risk tolerance:

  • Directional strategies: simple purchase of a derivative product to play the rise (call, futures) or fall (put, short selling) of the underlying asset.
  • Hedging strategies: purchase of options or futures contracts to protect against an unexpected decline in portfolio assets.
  • Arbitrage: exploiting price or valuation differences between different markets or related underlyings (e.g., pairs trading, equity index arbitrage).
  • Sectoral or geographic diversification: allocation towards underlyings from emerging markets, new technologies, commodities, or high-potential sectors.

The long-term trends for 2025 suggest opportunities across several asset classes, including:

  • Technology and artificial intelligence: strong innovation, rapid growth but increased volatility.
  • Energy transition: rising demand for strategic metals (lithium, copper, nickel).
  • Agricultural commodities: climate volatility, demographic growth, and food transition support interest in ETFs/ETCs on soybeans, wheat, or sugar.
  • Emerging market currencies or cryptocurrencies: diversification and management of foreign exchange risk in uncertain macroeconomic environments.

Risks and limitations associated with underlyings

Investing in underlyings, especially through derivatives, involves several inherent risks:

  • Capital loss risk: leverage can amplify losses quickly, particularly when the market moves against the intended strategy.
  • Volatility and market gaps: certain assets (such as agricultural commodities) experience significant price movements due to external shocks.
  • Absence of fundamental analysis: investing solely based on technical signals without considering the economic situation and fundamentals of the underlying increases the risk of error.
  • Regulatory complexity: taxation, liquidity, and regulation differ according to the listing venue or the structure of the product used.
  • Currency risk: when the underlying is denominated in a different currency from that of the investor, fluctuations in exchange rates can impact final performance.

Focus 2025: What prospects for major underlyings?

Global markets remain marked by macroeconomic uncertainty, geopolitical upheavals, and ecological transition. For each major family of underlyings, perspectives are forming around the following axes:

  • Equities: growth stocks (technology, healthcare) experience increased volatility. Cyclical sectors remain sensitive to rising interest rates or central bank monetary policies.
  • Indices: major indices remain sought after for their diversification, but exposure to specific regions or sectors (e.g., Asia, renewable energies) may offer superior potential with higher risk.
  • Commodities: oil and base metal prices remain dependent on economic conditions and geopolitical tensions. Soybeans and other agricultural commodities exhibit high volatility, exposing investors to rapid price shocks.
  • Currencies: the US dollar retains its status as a safe haven, but drastic exchange rate fluctuations require robust hedging strategies.

In-depth Example: The Case of WisdomTree Soybeans (SOYB) and Agricultural ETFs

In 2025, the soybean market perfectly illustrates the complexity of analyzing an agricultural underlying asset:

  • Global Production: harvests in Brazil, the United States, and Argentina, extreme weather conditions, and crop arbitrages (e.g., corn versus soybeans) significantly influence price dynamics.
  • Demand: Chinese demand, biofuel policies in America and Europe, and global food trends are essential drivers.
  • Market Factors: USDA-published changes in global stock levels, export logistics, geopolitical tensions, and agricultural policies impact prices daily.

The WisdomTree Soybeans (SOYB) thus allows access to soybean movements through a listed product, while incorporating in its analysis:

  • High Volatility: the risk of price amplitude is significant, both upwards and downwards, and depends on cyclical fundamental data.
  • Importance of Currency and Exchange: SOYB is traded in various currencies and on multiple exchanges (Xetra in EUR, London in USD, Borsa Italiana in EUR); it is therefore crucial to clearly specify the chosen reference when tracking the price or performance.
  • Management Fees: typical of a commodity ETF, around 0.49%, impacting long-term performance.
  • Assets Under Management: volume around 14 million euros on the Xetra exchange in November 2025.

Performance and Volatility

Based on the latest data, the WisdomTree Soybeans (SOYB) shows for the trailing year a performance of approximately +0.3%. Its annual volatility is close to 19%, reminding of the risky nature of the category. Performance since the beginning of 2025 is slightly negative, highlighting the importance of continuous analysis of the global agricultural environment.

Comparison with Other Agricultural ETFs/Underlying Assets

In the segment of agricultural ETFs, soybeans are not isolated: there are products exposed to wheat, corn, coffee, or sugar. The performance of each underlying depends on distinct factors (climate, logistics, public policies), hence the interest in a multi-sectoral analysis and sectoral diversification within the commodity portfolio.

Conclusion: mastering the analysis of underlyings for successful investment in 2025

The rigorous study of underlyings – whether it be stocks, indices, commodities, or currencies – is now essential for any investor wishing to optimize performance, diversify their portfolio, and manage risk effectively. Opportunities linked to ETFs, ETCs, and derivatives are immense but require precise information, vigilance over numbers, and a fine understanding of economic dynamics.

In 2025, market volatility, the diversity of asset classes, and the sophistication of products offer new horizons, provided that investments are made with insight. The analysis of fundamental, technical, and macroeconomic factors of the underlying remains the cornerstone of a solid and effective strategy.