Asset Class Correlations to the Dollar

Recently we have been looking at the dollar for trading signals on several other asset classes. That is not particularly distinctive; a number of analysts have been looking at the same inter-market relationships and drawing similar conclusions.

While having a fairly strong conviction in this trading theme, I wanted to have more data to get a better idea of what is happening here. Jeff Miller posted a piece in which he provides us near and longer term correlation data between the US Dollar and the S&P 500, along with some very helpful charts.

Building on his work, I have put together a set of Pearson r data to show the correlation between the US Dollar and stocks,US Treasury bonds, commodities, and gold. A couple of notes on methodology:  I have taken weekly closing values for data points, and used the following ETFs as proxies for the various assets:

Dollar – UUP

Stocks – SPY

Treasuries – IEF

Commodities – DBC

Gold – GLD

To the extent that the EFTs have any tracking error vs. the underlying indexes, there will be some imprecision, but this should be fairly immaterial.

We also look at a number of time periods, trying to capture bull phases, bear phases, and more complete market cycles. For my part, I have drawn some preliminary interpretations based on this study, but rather than commenting here, have opted to present only the data, and invite the reader to arrive at his/her own conclusions. Comments, as always, are welcome.

Please click on the following link to open the data table: ETF Pearson r

4 thoughts on “Asset Class Correlations to the Dollar

  1. Thank you for your exellent post and wonderful blog!

    If you have the number easily at hand, I would find it very interesting to know where we are at the moment in terms of UUP/SPY. What is the current pearson-R since the last SPY bottom 1007 in 6. of July? I would imagine that the correlation is once again becoming clearer…

  2. Pingback: The Simple Accountant's Finance Blog

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s