Correlations Among Stocks, Oil, Gold, Currencies in October and November 2009 Reveal Many Surprises

Knowing the correlations between your investments is essential for diversification. Here are the correlations for the period October 1st and November 30 among the major ETFs and indices covering most groups, from the S&P500, to oil, gold. and the dollar.

(please click to enlarge)

Values close to 1 or -1 indicate high correlations. Values close to 0 indicate little correlation.

Highest correlations

These are shown in green and red and are between:

-EWZ,BZF (Brazil stocks, Brazil currency)

-Chile stocks (ECH), Australian dollar, DIA and SPY

-Dow 30 also with gold and SPY

-Brazil, Euro (FXE) and Australian dollar

-Euro and Australian dollar

-Canadian dollar (FXC) and financials

-Miners (GDX) and SPY

-XLF an IWM

-SPY and the VIX (volatility index, inversely)

Lowest correlations

These are the most diversified stocks:

-UNG and the VIX

-XLF/IWM and DIA/SPY

-XLF and Chile

-XLF and oil

-Gold and Canadian dollar (!)

Those are very interesting ideas for diversification.

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