Turn to Your Left at the End of the Sky

Correlation between Asset Classes

There is a promising new website called Asset Correlation which shows the correlation matrix for a host of different asset classes over the past 90 trading days. I have been tracking it for a few months and it is amazing how all the asset classes exhibited far higher correlation during the recent panic. As normalcy has gradually returned to the markets it is interesting to see how the historical scenario of lower correlation between asset classes has returned. A few months ago almost all the cells in the matrix were green and correlations were hovering around 80-90% for most of the major classes. As of today, there is far lower correlation between the classes (indicated by the larger number of yellow and red cells). It will be interesting to keep an eye on this website over the next few months.

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June 19, 2008 - Posted by | Economics, Investing | , , , , , ,

3 Comments »

  1. I have heard that this site uses price. You should use returns. Also, we need more than 300 days .

    Comment by Frank | July 15, 2008 | Reply

  2. True. Maybe there isn’t 300 day data for some of the funds that they’re tracking.

    Comment by simplelight | July 15, 2008 | Reply

  3. The site publisher emailed me recently to let me know that the site now generates correlation data for periods up to 20 years. They also confirmed that the data is based on returns (as it should be).

    Comment by simplelight | February 2, 2009 | Reply


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