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Noce job. Can you make another post analyzing historical correlation among sectors?(technology, utilities, financial, retail etc.) Thanks.


Do you know any site , where we can compare to securities using the ISIN number?


Paul Teetor

Thank you for investigating these correlations. This is an important topic.

I think you are oversimplifying some cases by not controlling for common variables. Consider the case of the S&P 500 vs 10-year Treasury bonds. When I calculate the simple correlation of those prices over 10 years, I get -19%. But when I control for short-term interest rates, I get +40%.

Likewise, the correlation over the most-recent 2 years is -30%. But controlling for short-term rates, it becomes +57%.

Not only is are the controlled correlations different, they actually have opposite signs from the uncontrolled correlation! That is significant. The controlled calculation reveals a relationship we might otherwise miss.

F.Y.I., I used a continuous bond futures price as a surrogate for the 10-year bond price. And I used LIBOR as my short-term interest rate. Also, the controlled correlation calculation is easy to implement. You can read about it on Wikipedia (http://en.wikipedia.org/wiki/Partial_correlation).

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