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Correlation Related News
 in chronological order

 See also: Correlation Related Books, Correlation Related Scholarly Papers, or Correlation Home Page.

Table of Contents:
 

The Correlation Between Countries and Commodities

May 31, 2006
From SeekingAlpha:
 For my first article here with Hard Assets Investor, I wanted to touch on what I believe is a misconception about capturing a commodity effect.

In the last few years investors have become more aware of the diversification benefits that commodity exposure can bring to the equity portfolio table. Further, some of this effect can be captured by owning common stocks from countries that are large commodity producers.

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Correlation trade is extreme sport for hedge funds

May 24, 2006
From Reuters:
 Hedge funds are driving a surge in demand for the riskiest credit derivatives, with winner-takes-all strategies that appear to have turned the art of investing into the financial equivalent of extreme sports.

As hedge funds jostle for space in London's elite Mayfair district, intense competition has created an atmosphere in which only the highest possible returns will suffice, bankers say.

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Hedge Fund Replicators: High Stock Market Correlation, Lousy Diversifiers

May 1, 2006
From SeekingAlpha:
 Professor Harry Kat of the Cass Business School at City University, London, has been a thorn in the side of the hedge fund industry for several years now. And yesterday, he released his latest attack on the sector, reserving his sharpest barbs for the hedge fund replicators themselves. In fact, he concludes his analysis by replicating both Goldman Sach’s (GS) and Partners Groups own hedge fund replication offerings.

The latest paper is an extended version of Kat’s earlier work “Alternative Route to Hedge Fund Replication”. He adds over 20 pages of succinct and pointed commentary on everything from the research of Andrew Lo, Thomas Schneeweis, Lars Jaeger, Bill Fung and David Hsieh to the hedge fund replication offerings of Merrill Lynch (MER), Goldman Sachs, JP Morgan (JPM) and Partners Group.

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‘Correlation between India and other markets remains low’

April 22, 2006
From The Financial Express:
 Investing overseas has been made easy by the powers that be. The Finance Minister too has made a strong mention of creating opportunities to invest overseas. Fidelity Fund Management recently launched an overseas fund. Ashu Suyash, managing director and country head, Fidelity Fund Management, responded to queries posed by Akash Joshi of The Financial Express on the details and logic of the fund. Some excerpts.

Why do you think this is a good time to invest in overseas equity markets?

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‘Correlation’ rather than ‘contagion’

February 28, 2006
From The Financial Times:
 Why did so many world markets sell off on Tuesday? On the surface, there are similarities to the Asian crisis of 1997, which gave markets the word “contagion” – financial and currency crises spread from one country with weak economic fundamentals to another, until European and US markets also suffered.

This time, however, several analysts suggested that the cause was slightly different. Rather than contagion starting in China, where markets fell 9 per cent on Tuesday, they suggested that there was a correlated fall that involved many different assets that appeared over-valued and, therefore, unattractive for investors who had become more nervous about economic risks.

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Energy Least Correlated Sector With Market; Financials is Most

February 26, 2006
From SeekingAlpha:
 Even though most of us spend a large amount of time watching the market, sometimes we focus too much attention on where we think the overall market is going and too little time on the intra-market relationships within it. To help out in the latter, the following table highlights the correlation over the last year between different sectors of the market.

In the table, high values indicate that the two sectors being compared have a high correlation i.e., if one goes up the other usually follows (and vice versa). Low values imply that if one sector goes up, the other is likely to go down. For example, the sector that has had the highest correlation with the market over the last year has been financials (0.99), while energy has the lowest correlation (0.65). So if you think the market is going to go down, you should steer clear of financials and towards energy.

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Portfolio Blending and Market Correlation - The Basics

February 12, 2006
From SeekingAlpha:
 A reader left a question about how to blend lowly or negatively correlated assets, expressing concern that the portfolio ends up not moving at all.

Based on the tone of the question, I think the reader might be starting from the bottom up, and I think that viewing this from the top down is easier.

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Asset correlation - now your house may be at risk

January 31, 2006
From FT Alphaville:
 The FSA is worried, as it is wont to do. But the UK’s financial regulator is worried about something new - the risk posed by the increasing correlation amongst asset classes, which threatens to undermine traditional strategies for portfolio diversification.

“Instruments that have historically been used to diversify portfolios due to their low or negative correlation with other components of the portfolio may no longer necessarily fulfil this role as effectively,” the FSA states in the 2007 edition of its annual Financial Risk Outlook report.

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Are commodities still an inflation hedge?

November 16, 2006
From Reuters Italia:
 Commodities are unlikely to protect investor portfolios against rising inflation over the next few years because the market is flooded with speculative money and prices are too high, fund managers say.

But for investors with an outlook of more than five years, the case for including natural resources in a portfolio is intact.

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STT Offers Investors Free Correlation Tracker

November 14, 2006
From SeekingAlpha:
 I own stock in State Street Corp. (STT), sponsor of many popular ETFs including the select sector SPDRs, and I was pleased to discover that STT is making available a free correlation tracker at their SPDR website. The site says it is powered by SmartMoney.com and the tracker is very similar to the one offered by Smart Money which you have to pay to use. There is no way of assessing the validity of the data, but after playing with this tracker for a few days I have no complaints.

You can enter the ticker symbol for any security, and the screener will present lists of individual stocks which have the highest and lowest correlation. Naturally they also show how each of the select sector SPDRs correlates to that security. You can also directly compare any two stocks to determine their correlation. I find these correlation trackers very helpful and I have to admit that after using this one, I am more favorably disposed to using the select sector SPDRs.

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Picking up winning horses

August 26, 2006
From GulfNews.com:
 The average hedge fund manager across all strategies has returned just less than seven per cent so far this year, according to Credit Suisse Tremont, the index provider.

This had led many investors to wonder why they continue to pay steep fees for such sluggish returns.

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Clarifying Correlation

August 24, 2006
From Minyanville:
 Yesterday I made some comments about the correlation between stocks and the implication it brings to volatility and possible direction. It all has to do with sentiment. Scott describes the ebbs and flows of the market in terms of the amount of risk investors are willing to take. It’s the same thing.

The accompanying chart shows the implied correlation (the square of the correlation coefficient) of all S&P 500 (SPX) stocks against the price of the SPX over the last few years.

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Nikkei 225 and S&P500 Correlation Bad for Investors

August 8, 2006
From Seeking Alpha:
 In today's Wall Street Journal Asia Edition, Jamie Miyazaki describes a Merrill Lynch strategist's finding that Japanese and U.S. stocks remain highly correlated in HEARD IN ASIA: Have U.S. and Japan Markets 'Decoupled'? Strategist Says No.

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DJ Gold, USD Correlation Tight; Dollar Near Bottom - Analysts

July 28, 2006
From Onet.pl:
 Gold continues to have a tight, inverse relationship with the U.S. dollar of about 81%, said analysts at Asbury Research LLC in a recent research note released Friday, adding that the greenback is near a significant bottom point while gold is near a peak.

"This correlation exists due to the yellow metal's reputation as being a hedge against a weakening greenback," the analysts noted, adding that retail investors are just now coming off of a bullish extreme in gold of 76% bullish that was reached earlier this month.

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European equities with negative correlation to risk appetite preferred

June 12, 2006
From Newratings.com:
 Analysts at Dresdner Kleinwort Wasserstein say that if there is an ongoing shift in risk appetite, investors in the European equity markets should shift from sectors that have a positive correlation to risk appetite to sectors that have a negative relationship.

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Long bond mimics oil price with inflation in view

June 7, 2006
From Reuters:
 A close correlation between the 30-year Treasury bond's yield and crude oil prices this year may show that bond investors are worried about higher energy costs fueling inflation in the broader economy.

Long maturities, in particular the 30-year bond <US30YT=RR>, react closely to investors' expectations for inflation, which erodes a bond's value over time. The long bond's yield -- which moves inversely to its price -- often rises when bond market participants see signs inflation is on the rise, either in official price data or in commodity markets.

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Study Finds Direct Correlation Between Satisfaction and Investment In Outsourcing Management

May 25, 2006
From Global Services:
 EquaTerra, in its latest study, “Outsourcing Management and Governance: Building a Foundation for Outsourcing Success,” has found that there is a direct correlation between the investment that organizations make in Outsourcing Management and Governance (OM/G) and outsourcing engagement satisfaction.

The survey also finds that outsourcing satisfaction improves over time (respondents whose engagements had been in place more than two years were consistently more satisfied); IT and CRM executives cited the highest satisfaction levels.

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Lex live: Asset class correlation

May 12, 2006
From Euro2Day:
 Is it worth investors' time to examine how asset prices are correlated, in order to take advantage of potential mispricings? Capital structure arbitrage, especially by hedge funds, is a popular strategy and investment banks are keen to serve these particular investors with integrated research.

The sort of analysis that correctly anticipates a change in how one set of security holders gets rewarded at the expense of another would probably work best. Targets of leveraged buyouts, or companies under pressure to gear up, are situations in which shareholders typically gain and bondholders lose.

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Crescent City Capital Advisors Announces Launch of New Hedge Fund

February 22, 2006
From HedgeCo.Net:
 Crescent City Capital Advisors, L.L.C. (CCCA) announced that they have launched the Crescent City Dedicated Short Fund, L.P., a short-biased hedge fund.

Crescent City Capital Advisors L.L.C. is an alternative strategy asset management company. CCCA manages hedge funds and fund of funds focusing on quantitative trading strategies, providing services to institutional and high net worth individuals.

“The Crescent City Dedicated Short Fund, L.P. uses our proprietary quantitative strategies and targets positive returns with low drawdowns and a negative correlation to U.S. equity markets. Our statistically proven approach to trading allows for a disciplined investment process which focuses on strong volatility-adjusted returns and preservation of capital. Using this approach we are creating a true dedicated short fund that will never have long equity exposure,” said Seth Weinstein, CCCA portfolio manager.

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Hedge funds: losers stay losers, winners remain winners

February 19, 2006
From ITPBusiness.net:
 There are many strategies for the modern investor. But are hedge funds really the best way to make cash?

It’s that time of year again. The hedge fund and investment fund conferences are about to hit town. But in a world devoted to the single manager versus multi-manager argument, little mention has been made of the seismic shift in attitudes and stance both from provider and investor. In the flood of new offerings it is all too easy to forget the basic reasoning behind multi-manager funds.

Why invest? The arguments were, and are, clear. Portfolio diversification, lack of correlation to other market areas, access to managers ordinarily beyond the reach of private investors, mean performance averaging out returns over the long term and smoothing volatility. Against such worthy considerations are stacked equally compelling arguments: double charging, no real value added by an additional management layer, poor real returns compared to other hedge fund segments.

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Hedge funds hit after returns go below 7pc

January 27, 2006
From Business.Telegraph:
 The glamour and allure of hedge funds has faded, according to figures, which show the amount of money invested in them halved over the past year as returns fell below 7pc.
Oliver Schupp, the head of investment bank Credit Suisse's hedge fund index, said around $60billion-$65billion had been invested internationally in hedge funds during the past year, compared with more than $120billion in 2004.

"2004 was a record year, with never seen before figures, but investors got 4pc-5pc after performance fees and put the brakes on", he said.

"In all parts of the world, excluding the US, investors fared better investing in equities last year."

Hedge funds' average rate of return is estimated to have fallen by 3 percentage points to 6.62pc for 2005 - less than half what investors could have made by investing in the FTSE 100. But the final figures from CSFB's Tremont index, which tracks more than $800billion worth of assets worldwide, are expected to show London-based funds fared better than their US counterparts.

"Often people think hedge funds are uncorrelated to the market, but over the last 12-18 months correlation to the US equity market has risen quite a bit," said Mr Schupp.

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BluMont Canadian Opportunities Fund Reaches Five-Year Performance

January 24, 2006
From CNN Matthews:
 BluMont Capital Inc. (TSX VENTURE:BCC) and its wholly-owned subsidiary, BluMont Capital Corporation ("BluMont") are pleased to announce that the BluMont Canadian Opportunities Fund (the "Fund"), which employs multiple investment styles with low correlation to one another, has reached its five-year performance anniversary. Established January 1, 2001, the Fund has produced an annualized return of 13.02% (since inception) versus 6.62% for the S&P/TSX Total Return Index Value and 7.97% for the HFRI Fund Weighted Index over the same period. Moreover, the Fund has produced positive returns each of the past five calendar years with annualized volatility of 9.82% (versus 14.00% for the S&P/TSX TRIV) and a Sharpe Ratio of 1.07.

 The BluMont Canadian Opportunities Fund is the 9th-ranked alternative strategies fund in the 5-year category on GlobeFund.

The Fund strives to deliver consistently positive returns each year independent of the performance of the S&P/TSX Index by investing in multiple investment styles with low correlation to each other that also mitigate the overall risk of the portfolio through various hedging strategies by combining complementary and non-correlated strategies currently managed 45% by BluMont Capital, 25% by Hillsdale Investment Management, 10% by SciVest Capital Management, 10% by Integrated Managed Futures Corp and 10% by Orchard Asset Management.

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Energy trading regaining its spark

January 23, 2006
From The Houston Chronicle:
 Billions of dollars more are invested in energy trading today than in the past, much of it money from pension funds that is invested via banks and hedge funds. Despite the added investments, the level of activity is not the same, said David Sobotka, head of Merrill Lynch's global commodities group.

For example, there are not as many buyers and sellers of certain commodities as there were when companies such as Enron, Dynegy and Williams were active, Sobotka said.

"The markets were deeper geographically across products. The newer players are more narrowly focused," he said.

One is more likely to see less correlation between prices for the physical delivery of a commodity today and prices in the so-called financial markets for future delivery, Sobotka said.

It's that volatility that has some questioning whether the rush of hedge funds and speculative traders to the markets is somehow artificially driving up prices. Studies done by the New York Mercantile Exchange and others have discounted such claims, but Peter Huntsman Jr., CEO of chemical maker Huntsman Corp., and others say recent spikes in natural gas prices seem to defy market fundamentals.

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First Gulf Bank launches Al Saqer hedge fund

January 23, 2006
From AMI Info:
 Abu Dhabi-headquartered First Gulf Bank, which last week reported record net profits for 2005 of AED 1.06 billion, today launched its first open-ended, macro-strategy hedge fund - Al Saqer (The Falcon) - to offer investors absolute return generation with low volatility and a low correlation to traditional asset classes, such as equities and bonds.

 'This launch is in line with First Gulf Bank's strategy of offering clients sophisticated products. Al Saqer will adopt a macro-strategy not being limited to any one asset class, market, trading style or instrument; instead will enjoy extraordinary flexibility regarding investment policy and investment strategies.' (Andre Sayegh, Chief Operating Officer)

'We believe this Fund to be unique,' said Andre Sayegh, 'whereby we will reserve the right to invest in the booming property markets of Abu Dhabi and Dubai, and elsewhere for that matter.'

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Taiwan Dollar Has Weekly Drop on Stocks; Thai Baht Strengthens

January 21, 2006
From Bloomberg:
The Taiwan dollar this week dropped 0.4 percent to NT$32.125 against its U.S. counterpart, ending a three-week, 3.6 percent gain, according to Taipei Forex Inc. It may weaken to N$T32.30 next week, Liu said.

The benchmark Taiex index of stocks this week fell 2.9 percent as investors abroad took out a net $420 million from the equity market, according to stock exchange figures. Sales on Jan. 18 were the biggest since April 30, 2004.

The island's currency also weakened yesterday following a drop in the yen and South Korea's won, Liu said. The yen has lost 1 percent versus the U.S. dollar this week. The Korean won dropped 0.2 percent yesterday.

The Taiwan dollar had a correlation of 0.89 with the yen this year and 0.899 with the won, according to data compiled by Bloomberg. A value of 1 would mean they moved in lockstep.

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Hedge Funds Eclipse Traditional Indices in 2005

January 18, 2006
From Business Wire:
 The Greenwich-Van Global Hedge Fund Index gained +1.5% in December finishing 2005 up 8.4% according to hedge fund index provider Greenwich-Van Advisors, LLC. By comparison, the S&P 500 and the Lehman Brothers Aggregate Bond closed 2005 up 4.9% and 2.5%, respectively.

 "Over its 18-year history, the Index generated a net compound annualized return of 15.5% versus 12.0% for the S&P 500, marking eighteen consecutive years of positive annual performance for the Greenwich-Van Global Hedge Fund Index," observes Wade McKnight, Vice President, Greenwich-Van. "This strongly suggests downside protection and diversification benefits of hedge funds within a comprehensive asset allocation plan can greatly enhance a portfolio's reward/risk profile."

 December 2005 Greenwich-Van Hedge Global Hedge Fund Index returns follow below and are comprised of 972 funds reporting thus far. Final Index returns will be calculated and posted at www.vanhedge.com the end of January after additional funds have submitted returns.

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Gold Rises to 25-Year High on Investor Concern Over Inflation

January 17, 2006
From Bloomberg:
 Platinum fell as Japanese investors sold to lock in gains, according to Gordon Cheung, director of precious metals at Mitsui Bussan Precious Metals (HK) Ltd.

The metal, used in jewelry and in devices that clean car exhausts, is mined in South Africa and Russia. It couldn't keep its record as ``it's not supported by big volumes. There's no outside interest'' apart from the Japanese, Cheung said.

Metal for delivery in April rose as much as $15.40, or 1.5 percent, to $1,059 an ounce on Comex. The metal traded at $1,044 an ounce at 3:02 p.m. Singapore time.

Silver for immediate delivery rose to its highest in 21 years as investors bought the metal used in jewelry, electronics and photography.

Silver rose in line with gold, said Mitsui's Cheung. The metal has a correlation coefficient of 0.94 with gold. That measures the coincidence of closing daily gains and declines in the past year on a scale of -1, meaning prices move opposite each other, to 1, meaning they move in lockstep.

Metal for immediate delivery rose as much as 5 cents, or 0.5 percent, to $9.31 an ounce, the highest since June 1984. It traded at $9.22 an ounce at 3:30 p.m. Singapore time.

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The future of hedge funds

January 16, 2006
From Cayman Net News:
 The 1 February deadline is looming for US investment managers of hedge funds, which have more than 15 investors or more than $30 million in assets, to be licensed with the Securities Exchange Commission (SEC).

The reality is that even though most hedge funds are domiciled in offshore centres, most investment managers and hedge fund assets are onshore according to Sean Flynn, Head of Hedge Fund Services at UBS.

“Hedge funds are estimated to have over one trillion dollars invested, which play a significant role in trading activity on various stock exchanges around the world,” said Mr Flynn.

“Any offshore product that has that kind of financial impact onshore will attract the attention of regulators.”

He explained that the increased regulations in the US would raise the barrier to entry for small start up hedge fund managers, as there are costs associated with registering with the SEC.

He said hedge funds were once considered risky investments, but that has changed over the last number of years as the industry has evolved and the product has become a more acceptable asset class.

“Historically, high net worth individual investors, who desired an absolute return and reduced level of risk, have been the main investors into hedge funds. The landscape is now changing with institutional investors increasing their allocation to hedge funds, as they seek out alternative investments that offer low correlation to traditional portfolios of cash, bonds and equities.

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Nuveen Announces Enhanced Risk Strategies for Municipal Bond Funds

January 3, 2006
From Business Wire:
 Nuveen Investments provides high-quality investment services designed to help secure the long-term goals of institutions and high-net-worth investors as well as the consultants and financial advisors who serve them. Nuveen Investments markets its highly specialized investment teams, each with its own brand-name and area of expertise: NWQ, specializing in value-style equities; Nuveen, focused on fixed-income investments; Santa Barbara, committed to growth equities; Rittenhouse, dedicated to "blue-chip" growth equities; and Symphony, with expertise in alternative investments as well as equity and income portfolios. The Company manages approximately $131 billion in assets. Nuveen Investments, Inc. is listed on The New York Stock Exchange and trades under the symbol "JNC."

There is no assurance that these strategies will achieve their intended result. In addition to stated risks associated with investing in municipal closed-end bond funds, the principal risks associated with the use of hedging strategies are: (a) less than perfect correlation between the prices of the instrument used to effect the hedge and the market value of the securities in a fund's portfolio; (b) losses resulting from interest rate or other market movements not anticipated by Nuveen; (c) the obligation to meet additional variation margin or other payment requirements, and (d) the obligation to meet collateral requirements or other payment requirements, all of which could result in a fund being in a worse position than if than if such hedging techniques had not been used.

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See also: Correlation Related Books, Correlation Related Scholarly Papers, or Correlation Home Page.
 
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HEDGE FUND RISK AND OTHER DISCLOSURES
Hedge funds, including fund of funds (“Hedge Funds”), are unregistered private investment partnerships, funds or pools that may invest and trade in many different markets, strategies and instruments (including securities, non-securities and derivatives) and are NOT subject to the same regulatory requirements as mutual funds, including mutual fund requirements to provide certain periodic and standardized pricing and valuation information to investors. There are substantial risks in investing in Hedge Funds. Persons interested in investing in Hedge Funds should carefully note the following:
  • Hedge Funds represent speculative investments and involve a high degree of risk. An investor could lose all or a substantial portion of his/her investment. Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an investment in a Hedge Fund.
  • An investment in a Hedge Fund should be discretionary capital set aside strictly for speculative purposes.
  • An investment in a Hedge Fund is not suitable or desirable for all investors. Only qualified eligible investors may invest in Hedge Funds.
  • Hedge Fund offering documents are not reviewed or approved by federal or state regulators
  • Hedge Funds may be leveraged (including highly leveraged) and a Hedge Fund’s performance may be volatile
  • An investment in a Hedge Fund may be illiquid and there may be significant restrictions on transferring interests in a Hedge Fund. There is no secondary market for an investor’s investment in a Hedge Fund and none is expected to develop.
  • A Hedge Fund may have little or no operating history or performance and may use hypothetical or pro forma performance which may not reflect actual trading done by the manager or advisor and should be reviewed carefully. Investors should not