Jan

25

The correlation between daily changes in SPY and USO were checked every non-overlapping 10 day period, from present back to 2006. The attached chart shows the result.


Current correlation between stocks and oil is high but consistent with the entire period, though recently somewhat higher than the past two years.

Russ Sears writes:

Here is a scatter of the Absolute value of 21 day correlation of USO/SPY at the start of each calendar month. To the next 21 trading days log normal returns. I used the Absolute value because it appeared high R^2 increase volatility even if the correlation positive or negative. But R^ 2 curves this relationship. Not predictive but clearly implies increased volatility with higher R^2

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I would suggest that there is however much more to this suggested change in regimes on a daily or day trader holding period basis and those interested should study it further .


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