July 22, 2008 - (Courtesy: Bespoke Investment Group) 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.
Thanks Bespoke.
