Overview

Achieve greater diversification in your asset allocation by using this tool to calculate the correlation coefficient between any two variables, including stock market indexes, individual securities, commodities, currencies, interest rates.

The model calculates static or rolling correlations (12, 24, 36, 48, 60 months) for the given time period, based either on end-of-month values or monthly returns, going back to Dec. 1995. Including chart to visualize changes over time. 29 indicators included. You can replace any of them with the most appropriate ones for your analysis, by uploading historical values in the “Master” sheet.

Correlation statistically measures the degree of relationship between two variables in terms of a correlation coefficient that lies anywhere between +1.0 and -1.0. When it comes to diversified portfolios, correlation represents the degree of relationship between price (returns) movements of different assets included in the portfolio. A correlation of +1.0 means prices (returns) move in tandem (perfect positive correlation); a correlation of -1.0 means that prices (returns) move in completely opposite directions (perfect negative correlation). A correlation of 0 means the movement of one asset has no effect on the movement of the other asset. Well diversified portfolios should include uncorrelated or inversely correlated assets.

 

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