can someone explain why when the relationship is positive its better to go long futures as they will be higher than fowards. and when relationship is negative why it is the opposite?
Basically because futures require margin. So, if rates are positively correlated with asset prices, when asset prices are up the margin posted to me (as long futures) is higher and i can earn interest on that margin in a higher rate environment, so i will have a preference for futures when asset prices and rates are correlated. For forwards, there is no posting. So if rates are up and prices down and i am long, i don’t have to worry about posting cash at a high cost of borrowing.