Tuesday, February 2, 2010

Investing - and Properly Diversifying - in Foreign Currencies

There are many foreign currency ETFs in the market (we track them live here) making it very easy for investors to diversify away from the US dollar.

However, many investors may not realize that most of the currencies are correlated, making them very bad paired investments. In order to properly diversify, correlations should be close to zero.

These are the updated correlations for December 2009 and January 2010 for all currency ETFs:

(please click to enlarge)

The are some of the best non-correlations:

  • CNY and BNZ, DRR, ERO, EU, FXE (Euro) , FXC (Canada)
  • BNZ and CYB, ICI
  • DBV (the G-10 leveraged ETF) and the Euro ETFs, FXB, ULE, URR
  • FXC (Canada) and GBB (UK)
  • FXY and ICI, XRU

To receive technical analysis and alerts of these ETFs sent automatically to you simply enter the symbols in the Technical Trend Analysis Tool

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1 comment:

petersteel said...
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