6 Jan 2016
Gold correlation with equities - BBH
FXStreet (Guatemala) - Analysts at BBH explained that
the correlation between gold and equities is not what many would suspect.
Key Quotes:
"The idea that gold is a safe haven suggests it should be inversely correlated with the risk-asset, the S&P 500. Indeed the correlation (on percentage change) was negative last January through April. It was mostly positive in the May-July period before going back negative in August through most of November. It has been positive since, but at less than 0.1 is it not very significant.
On a purely directional basis (correlations on levels), the relationship between the S&P 500 and gold spent more time inversely correlated, but it is not particularly stable. It went from -0.60 last January to 0.60 in July. Currently the 60-day correlation is near -0.22.
Another asset to consider is emerging market equities. The correlation on a percentage change basis is -0.14 over the past 60 sessions. This is a four-month low. The most inverted in 2015 was about -0.27 in January 2014. The correlation was positive from late-March 2015 through mid-August, and then again in from mid-November to the start of this year.
On a directional basis (correlation on levels), gold and emerging market equities tend to move in the same direction, although this may be counter-intuitive. The correlation over the past sixty sessions is 0.73. The peak last year was in August near 0.90. There were two brief period last year in which the correlation was inverse, January and again in late-September to late-October."
the correlation between gold and equities is not what many would suspect.
Key Quotes:
"The idea that gold is a safe haven suggests it should be inversely correlated with the risk-asset, the S&P 500. Indeed the correlation (on percentage change) was negative last January through April. It was mostly positive in the May-July period before going back negative in August through most of November. It has been positive since, but at less than 0.1 is it not very significant.
On a purely directional basis (correlations on levels), the relationship between the S&P 500 and gold spent more time inversely correlated, but it is not particularly stable. It went from -0.60 last January to 0.60 in July. Currently the 60-day correlation is near -0.22.
Another asset to consider is emerging market equities. The correlation on a percentage change basis is -0.14 over the past 60 sessions. This is a four-month low. The most inverted in 2015 was about -0.27 in January 2014. The correlation was positive from late-March 2015 through mid-August, and then again in from mid-November to the start of this year.
On a directional basis (correlation on levels), gold and emerging market equities tend to move in the same direction, although this may be counter-intuitive. The correlation over the past sixty sessions is 0.73. The peak last year was in August near 0.90. There were two brief period last year in which the correlation was inverse, January and again in late-September to late-October."