Tuesday, May 4, 2010

Properly Investing in Currency ETFs

The crisis in Greece for the last several weeks has greatly affected the Euro and the USD. Below are the correlations of all currency ETFs for the period March 1 to April 30 2010. Correlations are essential for proper diversification.

In order to properly diversify, investors should look for uncorrelated ETFs, those with correlation values close to 0 above.

Some of the best and most interesting pairs are:

  • UDN (inverse US dollar), and also UUP with GBB (pound)
  • XRU (Ruble) and ERO (Euro)
  • JYN (Japan) and FXF (Swiss Franc)
  • UDN and CEW (emerg. currency)
  • INR (Rupee) and CYB (Yuan)

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