stocks correlation vs non-correlation

D

DTorSwing

not sure how many here care about finding non-correlated stocks to diversify but i am testing my system so stocks NOT non-correlated so they all dont move up/down in same direction at same time
here is 1 example from an old chart

do you all do correlated or non-correlated stocks?
 

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Most all stocks are correlated to the market but you can find those that are less correlated with each other. Stocks moves in groups, when biotech is moving then energy stocks could be resting or moving down. When software stocks are moving down or resting you might see financials or consumer stables moving. Hence, focus on picking stocks that are in different groups but look at ETF or indexes for strong groups. Keep in mind, usually when the S&P gets hit everything goes down. Well, you could try to buy gold at that time.
 
jajuanm2 said:
Most all stocks are correlated to the market but you can find those that are less correlated with each other. Stocks moves in groups, when biotech is moving then energy stocks could be resting or moving down. When software stocks are moving down or resting you might see financials or consumer stables moving. Hence, focus on picking stocks that are in different groups but look at ETF or indexes for strong groups. Keep in mind, usually when the S&P gets hit everything goes down. Well, you could try to buy gold at that time.
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very good detail about sectors and correlation. Thanks for sharing
I just know about 2 groups for now, that I am currently working on. Biotech/medical and energy and also starting to research Gold sector and its ETF, like JDST, DUST
 
jajuanm2 said:
Keep in mind, usually when the S&P gets hit everything goes down.
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well, the crazy Biotech didn't follow S&P and lot of them were up even when S&P. Bio didnt even have to make revenues to go up. hard to understand this sector, so I dont short this at all
 
DTorSwing said:
not sure how many here care about finding non-correlated stocks to diversify but i am testing my system so stocks NOT non-correlated so they all dont move up/down in same direction at same time
here is 1 example from an old chart

do you all do correlated or non-correlated stocks?
More...
I have an approach to measuring how much two syms are co-related in the price move considering the past one year's price move.

For example, use SPY as the base, the following are highly co-related to SPY, (corel 0 means the are the same)
Sym corel Sector Industry/Category
SPY 0.00000 ExchangeTradedFund LargeBlend
VOO 0.00941 ExchangeTradedFund LargeBlend
SSO 0.00972 ExchangeTradedFund Trading-LeveragedEquity
UPRO 0.00998 ExchangeTradedFund Trading-LeveragedEquity
SPXL 0.0105 ExchangeTradedFund Trading-LeveragedEquity
IVV 0.0108 ExchangeTradedFund LargeBlend
^GSPC 0.0142 index index
VV 0.0166 ExchangeTradedFund LargeBlend
IWB 0.0181 ExchangeTradedFund LargeBlend
SCHX 0.0186 ExchangeTradedFund LargeBlend
^RUI 0.0188 index index
ITOT 0.0236 ExchangeTradedFund LargeBlend
VTI 0.0256 ExchangeTradedFund LargeBlend
MGC 0.0257 ExchangeTradedFund LargeBlend

But the following are almost in the opposite (mostly are short selling ETF)
LODG 0.5194 Services Lodging
PGID 0.5199 IndustrialGoods Comml&ResBldgEquip&Sys
DXD 0.5218 ExchangeTradedFund Trading-InverseEquity
SDOW 0.5218 ExchangeTradedFund Trading-InverseEquity
DOG 0.5222 ExchangeTradedFund Trading-InverseEquity
SPXU 0.5304 ExchangeTradedFund Trading-InverseEquity
SDS 0.5312 ExchangeTradedFund Trading-InverseEquity
SPXS 0.5314 ExchangeTradedFund Trading-InverseEquity
SH 0.5327 ExchangeTradedFund Trading-InverseEquity

See the attached for the full list.
 

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aqtrader said:
I have an approach to measuring how much two syms are co-related in the price move considering the past one year's price move.

For example, use SPY as the base, the following are highly co-related to SPY, (corel 0 means the are the same)
See the attached for the full list.
More...

great work, really. thks for sharing
you have the whole universe in the list, all of NYSE, NASDAQ, ARCA for ETFs

so can I say they are less correlated to SPY if the Correlation is >0.25 or so and
0.5 is the opposite like the last few in the list
 
Non correlated would be a CC of 0. A correlation that approaches -1 is just as highly correlated as a correlation that approaches 1, it just moves in the opposite direction.

CC is from -1..0..1
 
i960 said:
Non correlated would be a CC of 0. A correlation that approaches -1 is just as highly correlated as a correlation that approaches 1, it just moves in the opposite direction.

CC is from -1..0..1
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Good. Just use CC, re-run the full sym list.
Rank Sym CC Sector Industry/Category
1 SPY 0.9959 ExchangeTradedFund LargeBlend SPDR_S&P_500_ETF
2 IVV 0.9916 ExchangeTradedFund LargeBlend iShares_Core_S&P_500
3 VV 0.9783 ExchangeTradedFund LargeBlend Vanguard_Large-Cap_ETF
4 VOO 0.9776 ExchangeTradedFund LargeBlend Vanguard_S&P_500_ETF
5 SCHX 0.9744 ExchangeTradedFund LargeBlend Schwab_US_Large-Cap_ETF
6 IWB 0.9691 ExchangeTradedFund LargeBlend iShares_Russell_1000
7 VONE 0.9609 unknown unknown Vanguard_Scottsdale_Funds_-_Vanguard_Russell_1000_ETF
8 ITOT 0.9586 ExchangeTradedFund LargeBlend iShares_Core_S&P_Total_US_Stock_Mkt
9 IYY 0.9580 ExchangeTradedFund LargeBlend iShares_Trust_-_iShares_Dow_Jones_US_ETF

At the bottom:
7642 PSQ -0.8840 ExchangeTradedFund Trading-InverseEquity ProShares_Trust_-_ProShares_Short_QQQ
7643 REW -0.8909 ExchangeTradedFund Trading-InverseEquity ProShares_Trust_-_ProShares_UltraShort_Technology
7644 TECS -0.9080 ExchangeTradedFund Trading-InverseEquity N/A
7645 SDOW -0.9189 ExchangeTradedFund Trading-InverseEquity ProShares_UltraPro_Short_Dow30
7646 DXD -0.9214 ExchangeTradedFund Trading-InverseEquity ProShares_UltraShort_Dow30
7647 DOG -0.9239 ExchangeTradedFund Trading-InverseEquity ProShares_Short_Dow30
7648 SPXS -0.9277 ExchangeTradedFund Trading-InverseEquity Direxion_Daily_S&P500_Bear_3X_ETF
7649 SPXU -0.9364 ExchangeTradedFund Trading-InverseEquity ProShares_Trust_-_ProShares_UltraPro_Short_S&P500
7650 SDS -0.9467 ExchangeTradedFund Trading-InverseEquity ProShares_UltraShort_S&P500
7651 SH -0.9515 ExchangeTradedFund Trading-InverseEquity ProShares_Short_S&P500

See the attached for the full list for those interested.
 

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