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#1 2016-10-27 22:01:06

SteveS
Member
From: Brisbane
Registered: 2016-08-06
Posts: 955
Trades :   

What are uncorrelated assets?

This came from reading today's item from Ainslie Bullion.

I understand what the term means, but I'm having trouble identifying truly uncorrelated investments. I could accept that gold and stocks are uncorrelated for the sake of argument, though they aren't completely decoupled, are they?

Are there any investments that are uncorrelated, really? I don't just mean in a negative sense, because if asset A tends to rise when asset B falls, that's still a correlation.

Last edited by SteveS (2016-10-27 22:01:51)


I intend to live forever. So far, so good.

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#2 2016-10-27 23:21:58

SilverDJ
Member
From: Australia
Registered: 2014-11-01
Posts: 2,528

Re: What are uncorrelated assets?

I don't think it's meant as a pure binary term. It's really about how much correlation there is between two assets.
e.g.
Gold price and gold stocks would be highly correlated.
Gold price and general mining stocks still correlated but less so.
Gold price and general stocks less correlated again, many (most?) might say uncorrelated.
Gold price and LEGO sets or collectable MY Little Pony's have hardly any correlation, so you'd definitely call them uncorrelated, but as you note it's not zero.
etc

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#3 2016-10-27 23:55:41

Old Codger
Silver Stacker
Registered: 2011-05-13
Posts: 5,128

Re: What are uncorrelated assets?

Assets that the government does NOT know about!

OC


"The Australian Labor Party is a democratic socialist party and has the objective of the democratic socialisation of industry, production, distribution and exchange, to the extent necessary to eliminate exploitation and other anti-social features in these fields."   -  ALP Constitution.

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#4 2016-10-28 00:41:37

mmm....shiney!
Silver Stacker
From: 昆士蘭
Registered: 2010-11-15
Posts: 15,941
Trades :   102 
Website

Re: What are uncorrelated assets?

http://stockcharts.com/school/doku.php? … n_coeffici

I think you'd really only be concerned about positive and negative correlation, rather than correlated and uncorrelated.

Last edited by mmm....shiney! (2016-10-28 00:46:10)


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#5 2016-10-28 03:03:39

SteveS
Member
From: Brisbane
Registered: 2016-08-06
Posts: 955
Trades :   

Re: What are uncorrelated assets?

mmm....shiney! wrote:

http://stockcharts.com/school/doku.php? … n_coeffici

I think you'd really only be concerned about positive and negative correlation, rather than correlated and uncorrelated.

Thanks for the link, but now I have a headache.

Last edited by SteveS (2016-10-28 03:03:53)


I intend to live forever. So far, so good.

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#6 2016-10-28 03:08:58

SteveS
Member
From: Brisbane
Registered: 2016-08-06
Posts: 955
Trades :   

Re: What are uncorrelated assets?

From an interweb site and therefore gospel:


"While gold has an inverse relationship with the dollar, stocks markets also have a deep connection to the metal. Investors commonly perceive gold as a haven in the event of a severe stock market downturn. Presumably, when we experience a global market decline, stocks and currencies move downward. Some investments become less desirable and investors assume gold will give them some breathing room. However, this does not always hold true, and investors can get burnt.

However, interestingly, gold's 12-month correlation with the S&P 500 over the past 45 years averages zero. So, whether gold is a haven asset or just a teaser remains a mystery."


I intend to live forever. So far, so good.

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#7 2016-10-28 03:15:22

mmm....shiney!
Silver Stacker
From: 昆士蘭
Registered: 2010-11-15
Posts: 15,941
Trades :   102 
Website

Re: What are uncorrelated assets?

SteveS wrote:

Thanks for the link, but now I have a headache.

Welcome to the world of financial self-responsibility. wink

Last edited by mmm....shiney! (2016-10-28 03:15:47)


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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