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Laurent Jeanmart

Interesting-thanks.That said, isn'it the mean that matter rather than correlation? As a matter of fact, correlation is a measure of the realtionship between two time series around their respective mean. In other word both oil and say, healthcare can go up and at the same time be inversely correlated.

Walt French

As a matter of fact, correlation is a measure of the realtionship between two time series around their respective mean.

Absolutely true. But for True Love and anything else that seldom runs smoothly, the concurrency of ups and downs suggests a similarity of the underlying assets.

Fr'instance, Consumer Staples' negative correlation with energy suggests that the opportunity for Coca Cola, Pringles & their ilk, is lessened when consumers' budgets get blown on gas.

Since these are traditionally low-volatility purchases (consumers buy 'em pretty much no matter what), (A) it doesn't require too much impact to generate a negative correlation, and (B) much of the impact may come from the Staples companies being unable to raise prices in line with inflation, or to enjoy the growth prospects that they used to have. It's unlikely that their costs of production are that terribly at fault.

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