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With the end of the end of the quarter we an compute the stock correlations for January through March. Correlations are extremely important for proper diversification of investments. For this purpose, investors, should not invest in two stocks that are highly positively or negatively correlated. The best pair of stocks are those that are uncorrelated, a number very close to zero.
The table below shows the values for some of the most popular stocks and ETFs.
(please click to enlarge)
Among the best uncorrelated pairs for 2010 there are several very interesting combinations:
- FXE and DIA, SPY: Euro and the general stock market
- UNG and EWZ: Natural gas and Brazil
- ECH and XLI, XLF, IWM, TZA: Chile and the rest
- GAS.TO and GLD: Canadian natural gas and gold
- UUP and SPY, FXY, VIX, DIA: US dolalr and S&P500, DJIA, Japan Yen and volatility
These are really interesting and surprising.
Note also how not so good the correlation between VXX and VIX is.
Please note that correlation does not imply causality. Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).
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