5 ms·

Very cool, although index funds like S&P 500 and DJI don't seem to work. https://betagainst.fun/asset/_gspc_spy/ https://betagainst.fun/asset/_gspc_spy/ https

Very cool, although index funds like S&P 500 and DJI don't seem to work. https://betagainst.fun/asset/_gspc_spy/ https://betagainst.fun/asset/_gspc_spy/ https://betagainst.fun/asset/_dji_dia/ https://betagainst.fun/asset/_dji_dia/

andrewmcwatters 4y ago
That doesn't make any sense anyway. You're asking what are the highest and lowest correlations of the market against the market itself. You cannot compare the same or roughly the same basket of assets against itself.
- scarmig 4y ago
  That still makes sense. Something can be more or less correlated with the broader market. It's very useful, actually: you can use securities that tend to not be correlated with the broader market to build a portfolio with less average variance.
  - andrewmcwatters 4y ago
    Yeah, I understand the concept, its just that regardless that people can graph it, doesn't mean that it widely has any tangible meaning other than being able to play with the numbers that come out of it. It's a concept that fits nicely in the category of technical analysis, but not one that allows you to find any particular market insights. If you took the whole tradable US securities market and said "what doesn't correlate with these price movements?" it doesn't mean anything. If it did, I would ask you, "What explicitly do you _think_ this means?" Just because you get numbers in and out doesn't mean you're working with anything meaningful. The only broadly meaningful concept you can get out of anti correlation with the market would be bonds because interest rates increasing push down the estimated future cash flows of publicly traded companies, affecting their valuations. Everything else can be considered speculation.
    - nickles 4y ago
      > It's a concept that fits nicely in the category of technical analysis, but not one that allows you to find any particular market insights. It's useful for hedging risk > The only broadly meaningful concept you can get out of anti correlation with the market would be bonds because interest rates increasing push down the estimated future cash flows of publicly traded companies, affecting their valuations. This is wrong. Consider pair trading or long/short strategies, both of which rely on estimating correlations.
    - JackFr 4y ago
      The correlation of an asset to the market is the definition of 'beta' and it is not technical analysis (from investopedia): "Beta is a measure used in fundamental analysis to determine the volatility of an asset or portfolio in relation to the overall market." "Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities in price trends and patterns seen on charts."
      - andrewmcwatters 4y ago
        I know what Investopedia says, but there's nothing fundamental about beta. Beta is the "measure of how an individual asset moves (on average) when the overall stock market increases or decreases." That's just looking at pricing. It's the same category as technical analysis.
    - bumby 4y ago
      >If you took the whole tradable US securities market and said "what doesn't correlate with these price movements?" it doesn't mean anything. If it did, I would ask you, "What explicitly do you _think_ this means?" Caveat: I'm an idiot and just trying to understand from a layman's perspective. Wouldn't you be able to use this to invest when you think the market, as a whole, is overvalued? For example, if the tool showed that a 30-year treasury bond (or similar) was negatively correlated with the S&P 500, wouldn't it suggest it was a good idea to buy bonds (or similar) when I thought the overall equity market was overheated? The idea being there are certain industry/stocks like maybe precious metals/mining that do well when the rest of the market is tanking?
- greatwave1 4y ago
  Yes, it makes sense. An asset's correlation are with the broader stock market is quantifiable. See also: https://www.investopedia.com/terms/b/beta.asp https://www.investopedia.com/terms/b/beta.asp
  - andrewmcwatters 4y ago
    No, it doesn't. The S&P 500 basically is the market. Any meaningful difference between it and the other US investable equities is marginally notable. It's literally asking "How do these roughly 500 plus or minus largest stocks correlate with the largely the same basket of securities?" If you took one company and compared it against the total US market, then you have something at least. If you take the market itself and compare it against itself, it makes no sense.
    - nickles 4y ago
      > If you took one company and compared it against the total US market, then you have something at least. This is a common metric referred to as market beta. > If you take the market itself and compare it against itself, it makes no sense. S&P 500 and Russell 2000 are both broad market indices, but they perform differently. Even using the same index constituents with different weightings (e.g. equal vs cap weighted) can produce meaningfully different results. It makes plenty of sense to compare them.
      - andrewmcwatters 4y ago
        I don't think you understand why multiple broad market indices exist in the first place. It has nothing to do with "performance" and everything to do with licensing fees when institutional organizations want to track against the market. No one. No one is seriously looking at the Russell 3000 and comparing it to the Wilshire 5000. To the child comment: I'm talking about two total market indices, apples to apples, and you're talking about apples to oranges. NASDAQ is a stock exchange, not an index. Further still, even if you were talking about the NASDAQ composite, they're two entirely different indices. They do not have the same goals. There might be some relative meaning there. There isn't much meaning between comparing two or more indices that have the same goals and constituents. You're only tracking the differences between constituents at that point, and you wouldn't need beta to do that. You could just calculate the difference between the constituents that are not a part of the total set.

andrewmcwatters 4y ago

That doesn't make any sense anyway. You're asking what are the highest and lowest correlations of the market against the market itself. You cannot compare the same or roughly the same basket of assets against itself.

scarmig 4y ago
That still makes sense. Something can be more or less correlated with the broader market. It's very useful, actually: you can use securities that tend to not be correlated with the broader market to build a portfolio with less average variance.
- andrewmcwatters 4y ago
  Yeah, I understand the concept, its just that regardless that people can graph it, doesn't mean that it widely has any tangible meaning other than being able to play with the numbers that come out of it. It's a concept that fits nicely in the category of technical analysis, but not one that allows you to find any particular market insights. If you took the whole tradable US securities market and said "what doesn't correlate with these price movements?" it doesn't mean anything. If it did, I would ask you, "What explicitly do you _think_ this means?" Just because you get numbers in and out doesn't mean you're working with anything meaningful. The only broadly meaningful concept you can get out of anti correlation with the market would be bonds because interest rates increasing push down the estimated future cash flows of publicly traded companies, affecting their valuations. Everything else can be considered speculation.
  - nickles 4y ago
    > It's a concept that fits nicely in the category of technical analysis, but not one that allows you to find any particular market insights. It's useful for hedging risk > The only broadly meaningful concept you can get out of anti correlation with the market would be bonds because interest rates increasing push down the estimated future cash flows of publicly traded companies, affecting their valuations. This is wrong. Consider pair trading or long/short strategies, both of which rely on estimating correlations.
  - JackFr 4y ago
    The correlation of an asset to the market is the definition of 'beta' and it is not technical analysis (from investopedia): "Beta is a measure used in fundamental analysis to determine the volatility of an asset or portfolio in relation to the overall market." "Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities in price trends and patterns seen on charts."
    - andrewmcwatters 4y ago
      I know what Investopedia says, but there's nothing fundamental about beta. Beta is the "measure of how an individual asset moves (on average) when the overall stock market increases or decreases." That's just looking at pricing. It's the same category as technical analysis.
  - bumby 4y ago
    >If you took the whole tradable US securities market and said "what doesn't correlate with these price movements?" it doesn't mean anything. If it did, I would ask you, "What explicitly do you _think_ this means?" Caveat: I'm an idiot and just trying to understand from a layman's perspective. Wouldn't you be able to use this to invest when you think the market, as a whole, is overvalued? For example, if the tool showed that a 30-year treasury bond (or similar) was negatively correlated with the S&P 500, wouldn't it suggest it was a good idea to buy bonds (or similar) when I thought the overall equity market was overheated? The idea being there are certain industry/stocks like maybe precious metals/mining that do well when the rest of the market is tanking?
greatwave1 4y ago
Yes, it makes sense. An asset's correlation are with the broader stock market is quantifiable. See also: https://www.investopedia.com/terms/b/beta.asp https://www.investopedia.com/terms/b/beta.asp
- andrewmcwatters 4y ago
  No, it doesn't. The S&P 500 basically is the market. Any meaningful difference between it and the other US investable equities is marginally notable. It's literally asking "How do these roughly 500 plus or minus largest stocks correlate with the largely the same basket of securities?" If you took one company and compared it against the total US market, then you have something at least. If you take the market itself and compare it against itself, it makes no sense.
  - nickles 4y ago
    > If you took one company and compared it against the total US market, then you have something at least. This is a common metric referred to as market beta. > If you take the market itself and compare it against itself, it makes no sense. S&P 500 and Russell 2000 are both broad market indices, but they perform differently. Even using the same index constituents with different weightings (e.g. equal vs cap weighted) can produce meaningfully different results. It makes plenty of sense to compare them.
    - andrewmcwatters 4y ago
      I don't think you understand why multiple broad market indices exist in the first place. It has nothing to do with "performance" and everything to do with licensing fees when institutional organizations want to track against the market. No one. No one is seriously looking at the Russell 3000 and comparing it to the Wilshire 5000. To the child comment: I'm talking about two total market indices, apples to apples, and you're talking about apples to oranges. NASDAQ is a stock exchange, not an index. Further still, even if you were talking about the NASDAQ composite, they're two entirely different indices. They do not have the same goals. There might be some relative meaning there. There isn't much meaning between comparing two or more indices that have the same goals and constituents. You're only tracking the differences between constituents at that point, and you wouldn't need beta to do that. You could just calculate the difference between the constituents that are not a part of the total set.