Sunday, March 14, 2010

Correlation of the New CARA 100 Stocks

The CARA100 stocks were update in late February. There are a group of very high quality stocks. Here are the correlations of all its components for the period January 4 2010 to March 12 2010, computed with our stock correlator tool.

As readers here know, we extensively use correlation for proper investment diversification.

(please click to enlarge; it is a large image)

You may also scroll through the image here (scroll to the right to view) or through imageshack (zoom in).

For proper diversification we always look for uncorrelated stocks. These are shown in bold blue. Green and red correspond to positive and negative correlations of over 0.85. Either is not good for diversification.

Perfect pairs of uncorrelated stocks are Boeing, BA and IBM, as well as Target, TGT and NUE, but there are several other good pairs.

Note: SCHW is not shown as we could get stock price info.

Disclaimer: The author does not hold any positions on any of these stocks.

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