What are uncorrelated assets?

Discussion in 'Wealth Creation & Management' started by SteveS, Oct 28, 2016.

  1. SteveS

    SteveS New Member

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    This came from reading today's item from Ainslie Bullion.

    I understand what the term means, but I'm having trouble identifying truly uncorrelated investments. I could accept that gold and stocks are uncorrelated for the sake of argument, though they aren't completely decoupled, are they?

    Are there any investments that are uncorrelated, really? I don't just mean in a negative sense, because if asset A tends to rise when asset B falls, that's still a correlation.
     
  2. SilverDJ

    SilverDJ Well-Known Member

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    I don't think it's meant as a pure binary term. It's really about how much correlation there is between two assets.
    e.g.
    Gold price and gold stocks would be highly correlated.
    Gold price and general mining stocks still correlated but less so.
    Gold price and general stocks less correlated again, many (most?) might say uncorrelated.
    Gold price and LEGO sets or collectable MY Little Pony's have hardly any correlation, so you'd definitely call them uncorrelated, but as you note it's not zero.
    etc
     
  3. Old Codger

    Old Codger Active Member Silver Stacker

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    Assets that the government does NOT know about!

    OC
     
  4. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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  5. SteveS

    SteveS New Member

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  6. SteveS

    SteveS New Member

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    From an interweb site and therefore gospel:


    "While gold has an inverse relationship with the dollar, stocks markets also have a deep connection to the metal. Investors commonly perceive gold as a haven in the event of a severe stock market downturn. Presumably, when we experience a global market decline, stocks and currencies move downward. Some investments become less desirable and investors assume gold will give them some breathing room. However, this does not always hold true, and investors can get burnt.

    However, interestingly, gold's 12-month correlation with the S&P 500 over the past 45 years averages zero. So, whether gold is a haven asset or just a teaser remains a mystery."
     
  7. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Welcome to the world of financial self-responsibility. ;)
     

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