JPY to Crude Correlation

A high correlation (1) means people are buying JPY (selling USD) and crude coincidentally (or selling both simultaneously [which implies a universally strong dollar]) Interestingly enough, since usually heavy buying of JPY occurs in a derisking context, this is contrary to what one would expect to happen of the "weak dollar / strong crude" trade. Derisking has lately meant a stronger Yen and a cheaper oil price (implying strong dollar), seemingly contrary dollar movements.

Of considerable interest is the September 08 swing from positive correlation to negative. It is difficult to decipher any clear buy/sell signal for crude out of this, as the correlation oscillates frequently. Lately, though, a negative correlation has coincided with downward crude movement.

It reminds us that crude is not anything close to a pure proxy for short dollar in the short term, and its own supply/demand dynamics largely dominate at times.

Fear Trade Correlations

Here are some correlations of popular fear trades with equities as a backdrop.

Know What You're Buying: Correlations (Gold Vs S&P)

It's been a while since I've posted to the blog, but I have a feeling my dry period of creativity is over. Keep your eyes open.

From here, I'm going to start posting correlations of varying instruments. For short term trading, it is important to know these things and how they change. These are rolling 30 day averages on daily correlations in changes of close. If you have any particular instruments you are interested in, let me know and I'll post them. If you aren't familiar with correlation, a value of 1 is 100% positive correlation and -1 is 100% negative correlation. A value of 0 means the instruments' daily motions have little to do with each other.

Let's start today with S&P and Gold: