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Correlations


Discussion in Treasury Notes and Bonds

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Correlations

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  #1 (permalink)
Irvine
 
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Hello all,

Do any of you know of instruments/markets that to one extent or another are correlated or inverse-correlated to the treasury bonds (ZB)? I'm aware that DX and ES often move in an inverse correlation with ZB. And SOMETIMES, GC is correlated. Just wondering if there are any others than I know about?

I know no single instrument is 100% correlated, and if it was, that would be of little use. I'm looking to compile as many of the "sometimes correlated" together to watch for confirmation of ZB movements.

Thanks!

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  #3 (permalink)
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bgrosse View Post
Hello all,

Do any of you know of instruments/markets that to one extent or another are correlated or inverse-correlated to the treasure bonds (ZB)? I'm aware that DX and ES often move in an inverse correlation with ZB. And SOMETIMES, GC is correlated. Just wondering if there are any others than I know about?

I know no single instrument is 100% correlated, and if it was, that would be of little use. I'm looking to compile as many of the "sometimes correlated" together to watch for confirmation of ZB movements.

Thanks!

hi bgrosse - not sure when you say treasure bonds whether you mean only one duration, but the 5, 10 and 30 years Treasuries are all directly correlated.

As well as ES, you also have NQ that is typically inversely correlated to Treasuries.

On some days CL tends to be inversely correlated to Treasuries as well, given it goes hand in hand with ES but that's more sporadic and not as straightforward as the others I would say.

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  #4 (permalink)
Irvine
 
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Thanks, xplorer! Yeah, I'm watching the 30 year.

I will add NQ to the mix. Thanks for the suggestion!

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  #5 (permalink)
Miami Lakes
 
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If you trade currencies, the canadian and australian dollars are a good choice, they are highly correlated, selling the outperformer and buying the underperformer any given day is almost always a sure win.

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  #6 (permalink)
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There must be a better platform for figuring correlations than this, but I like to use TLT as a proxy for ZB and check out ETF correlations, at the bottom of this page. (I do not know how often this is updated)

ETF Chart :: ETFScreen.com

Note that as volatility increases every asset class becomes more correlated to SPY, except volatlity products, which become less correlated.

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  #7 (permalink)
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Also, here is a kinda cool correlation matrix for TLT from dough.com.

As the IV numbers in the row down the center diagonal increase, the green colors should get lighter and the reds fade to green.


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  #8 (permalink)
New Waverly
 
 
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MRCI's Inter-Market Correlations

That is for longer term type correlation trading. However, if you are looking for intraday correlations most platforms have a correlation coefficient study. I know sierra charts has one. If your platform does not, it is a relatively simple calculation if you use excel, matlab, wolfram alpha, etc. Plus there is a lot of information on it out there. \

How to Calculate the Correlation Coefficient

Goodluck!

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  #9 (permalink)
Irvine
 
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Thanks so much for the replies, guys! These are all great resources for further exploring the correlations question.

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  #10 (permalink)
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You'd want to watch crude oil (CLE) as well when any significant releases come out. Its inversely correlated and affects the 30s and ultras much more than notes and fives. Also might want to watch the NoB.

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