Today's Wall Street Journal had an interesting article about asset class correlations. With that in mind, below we highlight (click here for PDF) a correlation matrix of various asset classes including the S&P 500 sectors, oil, gold, the dollar, the yen, emerging markets, the 10-year note and the FTSE 100. The first matrix highlights the correlation between the daily percent changes of asset classes since the S&P 500 peaked on October 9th, 2007. Each column (vertical) is color coded from green to red based on highest to lowest correlations.
The second matrix highlights the correlations between the same asset classes, only from a much longer time horizon (1990-present). Then, in the bottom chart, we highlight the difference between the short-term and long-term correlations to see where differences arise. Correlations that have increased since the bear market began in 10/07 are shaded in light green, while correlations that have decreased are shaded in light red. In each column, the biggest increase and decrease in correlation is highlighted in dark green or red. As shown, correlations have generally increased among sectors, while stocks have become less correlated with oil, gold and Treasuries. Correlations between stocks and the yen have increased the most in the short-term compared to their long-term correlations. To view the matrices in PDF form, please click here. It's definitely an interesting data set to analyze and it's better to let the info speak for itself.
Once again, nice work.
Posted by: Bill Luby | July 21, 2008 at 07:45 PM
lovely use of conditional formatting + correl function, guys.
Posted by: Danny | July 21, 2008 at 08:55 PM
Very Cool ...
Posted by: Nidhi | July 21, 2008 at 11:03 PM
these charts are all about the relevance of their time series for their asset class. For EM investors 1990-1998 and 1998-present would probably spring very different correlations. in the next present-tomorrow time period we might be witnessing another inflection point. but thank you for these.
Posted by: chrs | July 26, 2008 at 12:44 PM
If you're looking for real time data on correlation between asset classes you can go to http://www.assetcorrelation.com.
I think it allows you to add up to 20 stocks or exchange traded funds and then generates the correlation matrix for you based on the daily returns
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