Quote from illiquid:
Well that was my point -- comparing dollars to crude is much like comparing 2 stocks in completely different sectors. In any case, when it comes to currency differences, all markets are affected by simple exchange rate changes, eg, IBM staying at $70 will fluctuate in terms of euros. But that doesn't mean there will be a predictive edge in comparing the movement of the euro vs IBM, only that you will know the price of IBM in euros will go down if the euro goes higher and IBM stays the same in terms of dollars. There is as much edge here as knowing that we're in a bull market and that most stocks will generally move higher under such conditions.
I guess my main question is: don't you need a good reason/angle in comparing 2 markets for predictive purposes, other than just slapping 2 charts over each other and saying sometimes they move together, sometimes not? Why not concentrate on markets where there is a direct logical relationship -- say, taiwanese dollar vs korean won, crude vs gasoline, Cheescake Factory vs Wendy's etc? Is it your point that there is no more edge to be found in these "obviously" correlated markets, and that now we must stretch our horizons in finding more esoteric relationships?
