Friday, April 29, 2011

ETF's for the season

If you are bearish about the dollar as I am, take a look at these two ETF's.
Here is my commentary

Brics are going nowhere

Was hilarious to see financial news broadcasters commenting on BRIC's running out of steam earlier this here.
Here is my take.

Japan in Focus

Dated article on Japan.
Just to remind readers, this article was right after the earthquake in Fukushima
Click here for a read.

Friday, April 08, 2011

Oil Correlations

We are all intrigued with the way the stock market has been increasingly tracking the crude oil price movements.
But there are some startling facts when we take a closer look at the numbers behind the story.

For my analysis, I looked OIL (iPath S&P GSCI Crude Oil TR Index ETN), which tracks the Goldman Sachs Crude Oil Return index which is composed of WTI crude oil futures contracts traded on NYME.

Now if we compare the correlation based on yearly returns on this ETN and the 3 major US based Indices we notice a gradual increase of correlation for the last 4 years, from 2007 to 2010.
Yearly S&P 500 Dow Nasdaq
2010 72.25% 70.09% 67.83%
2009 56.43% 54.32% 51.41%
2008 39.58% 36.58% 34.97%
2007 10.26% 6.90% 6.47%

But what will be startling is the correlation of YTD returns for the same combinations as above and also compare it for the last 5 years for the same time period (first 68 trading days).
YTD S&P 500 Dow Nasdaq
2011 -19.46% -18.61% -23.74%
2010 63.96% 62.81% 54.80%
2009 47.86% 44.92% 43.53%
2008 60.71% 59.49% 58.58%
2007 9.55% 7.35% 4.86%

2011 shows us that the equity markets are negatively correlated to the crude oil prices but instead of a behavioral change in relationship, I would attribute it to the systemic pressures on the market such as the Mid-Eastern political upheavals, Japanese nuclear meltdown and the Capital Hill crisis.