Monday, January 4, 2010

Stock and ETF Correlations For Q4 2009: How to Diversify Your Investments

2009 has ended, and with that it's time to look at the correlations in Q4 of 2009. Every end of quarter we analyze the correlations of major stocks and ETFs.

Correlations are very useful for diversification. To properly diversy, am investor should stay away from highly correlated stocks. That means both positively or negatively correlations.

The most uncorrelated stocks are highlighted in bold face in the table below.

(please click to enlarge)

You can see the best uncorrelated pairs below:
  • XLF and DIA (surprise!)
  • FXE (Euro) and VIX (volatility)
  • FXE and ECH (Chile)
  • GS and EWZ (Brazil), FXA (Aussie dollar), GDX (Miners), USO (oil)
  • IWM (Russel 200) and FXA, as well as GLD and USO
  • UNG and FXC (Canadian loonie)
  • UUP (US dollar) and IWM (interesting!)

This is the way it was in Q4 2009. Note: Use the Technical Trend Analysis Tool to receive technical analysis and alerts of these stocks and ETFs.

Other correlations studies are forthcoming (currencies, commodities). Please stay tuned.

Stumble Upon Toolbar

No comments:

Financial TV

Blog Archive

// adding Google analytics