Tuesday, May 25, 2010

The Month of the Draw Down

Diversifying across risk assets doesn't work when systemic crisis shift correlations to one.



Source: Yahoo

Posted by Jake at 3:34 AM
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7 comments:

  1. DIY InvestorMay 25, 2010 at 1:17 PM

    Help me here but your chart doesn't show everything perfectly correlated. Although the colors make it difficult to see exactly what asset classes we're viewing it looks like long Treasuries had a positive return along with a couple of others(they zigged when most other stuff zagged) and oil was down big.
    There were several asset classes, however, that moved pretty closely together.

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  2. SPECTRE of DeflationMay 25, 2010 at 1:42 PM

    Eye candy! Great comparative chart of the various sectors/commodities ETFs. A picture really is worth a thousand words.

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  3. EconomicDisconnectMay 25, 2010 at 4:19 PM

    I like this chart.

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  4. JakeMay 25, 2010 at 6:01 PM

    You said "Help me here but your chart doesn't show everything perfectly correlated."

    Agreed... noted in my post that I say 'risk assets' have become increasingly correlated. In my view (not necessarily shared by all) Long Treasuries are not risk assets. Increasingly, it looks like gold has been a flight to quality asset as well...

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  5. UnknownMay 25, 2010 at 6:15 PM

    Here is more ETF eye candy for "SPECTRE of Deflation":

    http://capitalmarketmaps.com/etf

    It's a daily percent change visualization of country and currency ETF's along with commodity and sector ETF's.

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  6. AnonymousMay 26, 2010 at 2:39 AM

    Thanks for all the nice charts.

    Could you perhaps start converting to different line types or glyphs?

    Now you are using 6+ colours with fairly thin lines, which makes it really difficult to tell the colours apart.

    Especially for us colour blind...

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  7. DIY InvestorMay 26, 2010 at 3:46 AM

    I get your point on long treasuries not being risk assets. I like this chart because it clearly shows the value of diversification and why many investors who believe the market to be inefficient hurt themselves. Go back a couple of months and you find that many were reallocating into low duration bonds - they were convinced rates were headed higher.

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