fyi - assetcorrelation.com site

cabronjames · Post by **cabronjames** » Wed Aug 10, 2011 8:47 pm

fyi - This site assetcorrelation.com is useful tool for getting a quick rough idea of the correlations between different asset classes.

tbh, I don't recall where I read about this site initially. If I read about it on this board here, forgive me for the redundancy.

The site's FAQ claims to use dividend-adjusted data from Yahoo Finance. I'm interpreting this to be the "Adj. Close" column on Yahoo Finance's historical prices. The site assumes equal portions of each asset, which happens to be compatible with the Perm Port equal allocation to each asset.

Out of curiosity, I checked the 5 yr correlation (which ends up being for the time frame 2006-08-10 to 2011-08-09) for VTI, TLT, GLD, SHY. I picked the 5 yr instead of the 10 yr, because GLD doesn't have 10 yrs of data (GLD goes back to 2004).

The correlations are:
VTI TLT -.43
VTI GLD .07
VTI SHY -.44
TLT GLD .03
TLT SHY .61
GLD SHY .08

It says "Intra-portfolio diversification = -0.01"

For the 3X33 stock/bond/gold portfolio, it notes "Intra-portfolio diversification = -0.11"

I hypothesize this "Intra-portfolio diversification" is merely an average of the individual 2-asset correlations, which is confirmed in both the 4X25 & 3X33 cases.