Correlations 3 year weekly ending 4/26/2008
  DIA SPY QQQQ IWV IWM IWN EFA EZU EWJ EPP EEM EWU EWA EWZ EWT EWH EWY IFN SMH IAH SWH BDH WMH TTH HHH IIH PPH XLF XLB XLE RTH RKH BBH RWR TLT IEF ^XAU
DIA 1.00 0.97 0.83 0.95 0.84 0.82 0.81 0.80 0.65 0.73 0.79 0.78 0.67 0.68 0.57 0.70 0.67 0.60 0.65 0.71 0.74 0.63 0.77 0.70 0.62 0.58 0.65 0.82 0.76 0.51 0.78 0.72 0.48 0.71 -0.22 -0.30 0.26
SPY 0.97 1.00 0.85 0.99 0.90 0.88 0.84 0.82 0.67 0.77 0.83 0.81 0.72 0.72 0.58 0.73 0.70 0.62 0.68 0.69 0.74 0.67 0.80 0.70 0.66 0.59 0.67 0.85 0.78 0.61 0.77 0.74 0.52 0.75 -0.22 -0.30 0.32
QQQQ 0.83 0.85 1.00 0.86 0.80 0.75 0.74 0.74 0.59 0.68 0.76 0.71 0.64 0.63 0.62 0.68 0.68 0.60 0.80 0.85 0.85 0.79 0.82 0.57 0.75 0.64 0.48 0.62 0.68 0.46 0.72 0.49 0.52 0.57 -0.19 -0.27 0.25
IWV 0.95 0.99 0.86 1.00 0.92 0.90 0.83 0.81 0.66 0.76 0.83 0.80 0.72 0.72 0.60 0.71 0.70 0.60 0.70 0.69 0.75 0.69 0.80 0.68 0.66 0.61 0.64 0.85 0.79 0.61 0.80 0.74 0.50 0.76 -0.23 -0.31 0.33
IWM 0.84 0.90 0.80 0.92 1.00 0.98 0.76 0.74 0.62 0.68 0.80 0.74 0.64 0.68 0.58 0.66 0.67 0.57 0.70 0.63 0.68 0.67 0.73 0.58 0.62 0.63 0.52 0.75 0.76 0.59 0.74 0.64 0.49 0.77 -0.24 -0.29 0.34
IWN 0.82 0.88 0.75 0.90 0.98 1.00 0.72 0.69 0.59 0.64 0.75 0.69 0.61 0.64 0.56 0.62 0.64 0.51 0.67 0.59 0.64 0.63 0.68 0.56 0.59 0.60 0.51 0.79 0.72 0.57 0.76 0.70 0.46 0.79 -0.23 -0.28 0.30
EFA 0.81 0.84 0.74 0.83 0.76 0.72 1.00 0.95 0.83 0.86 0.89 0.93 0.81 0.78 0.68 0.73 0.75 0.65 0.57 0.58 0.66 0.60 0.78 0.59 0.51 0.52 0.58 0.59 0.81 0.66 0.57 0.47 0.46 0.58 -0.20 -0.26 0.53
EZU 0.80 0.82 0.74 0.81 0.74 0.69 0.95 1.00 0.69 0.78 0.86 0.90 0.74 0.75 0.64 0.67 0.69 0.61 0.57 0.57 0.67 0.59 0.76 0.59 0.51 0.51 0.60 0.54 0.79 0.65 0.53 0.42 0.47 0.53 -0.20 -0.25 0.52
EWJ 0.65 0.67 0.59 0.66 0.62 0.59 0.83 0.69 1.00 0.67 0.74 0.70 0.63 0.58 0.66 0.60 0.71 0.57 0.46 0.44 0.54 0.52 0.60 0.45 0.43 0.42 0.47 0.52 0.59 0.49 0.51 0.43 0.38 0.47 -0.16 -0.18 0.36
EPP 0.73 0.77 0.68 0.76 0.68 0.64 0.86 0.78 0.67 1.00 0.84 0.80 0.96 0.78 0.58 0.85 0.75 0.61 0.48 0.51 0.57 0.55 0.69 0.49 0.51 0.44 0.48 0.56 0.79 0.61 0.51 0.44 0.39 0.55 -0.25 -0.33 0.55
EEM 0.79 0.83 0.76 0.83 0.80 0.75 0.89 0.86 0.74 0.84 1.00 0.84 0.78 0.88 0.74 0.79 0.85 0.72 0.61 0.59 0.63 0.67 0.77 0.54 0.54 0.54 0.58 0.58 0.83 0.69 0.58 0.46 0.47 0.57 -0.28 -0.33 0.55
EWU 0.78 0.81 0.71 0.80 0.74 0.69 0.93 0.90 0.70 0.80 0.84 1.00 0.75 0.78 0.61 0.69 0.69 0.59 0.55 0.57 0.62 0.56 0.74 0.56 0.46 0.52 0.53 0.57 0.79 0.68 0.52 0.44 0.42 0.55 -0.24 -0.28 0.53
EWA 0.67 0.72 0.64 0.72 0.64 0.61 0.81 0.74 0.63 0.96 0.78 0.75 1.00 0.75 0.55 0.74 0.71 0.55 0.46 0.48 0.55 0.52 0.64 0.46 0.49 0.43 0.42 0.52 0.78 0.60 0.48 0.40 0.34 0.53 -0.23 -0.31 0.58
EWZ 0.68 0.72 0.63 0.72 0.68 0.64 0.78 0.75 0.58 0.78 0.88 0.78 0.75 1.00 0.56 0.65 0.70 0.55 0.53 0.47 0.50 0.56 0.65 0.43 0.45 0.49 0.45 0.47 0.79 0.69 0.47 0.36 0.39 0.47 -0.29 -0.32 0.62
EWT 0.57 0.58 0.62 0.60 0.58 0.56 0.68 0.64 0.66 0.58 0.74 0.61 0.55 0.56 1.00 0.57 0.74 0.52 0.54 0.52 0.55 0.54 0.56 0.35 0.47 0.45 0.42 0.46 0.53 0.36 0.53 0.38 0.34 0.42 -0.19 -0.20 0.32
EWH 0.70 0.73 0.68 0.71 0.66 0.62 0.73 0.67 0.60 0.85 0.79 0.69 0.74 0.65 0.57 1.00 0.74 0.65 0.43 0.51 0.54 0.52 0.65 0.48 0.52 0.43 0.52 0.56 0.64 0.49 0.53 0.45 0.40 0.49 -0.18 -0.24 0.34
EWY 0.67 0.70 0.68 0.70 0.67 0.64 0.75 0.69 0.71 0.75 0.85 0.69 0.71 0.70 0.74 0.74 1.00 0.63 0.53 0.48 0.56 0.61 0.67 0.46 0.52 0.47 0.50 0.53 0.67 0.48 0.55 0.43 0.37 0.50 -0.26 -0.30 0.41
IFN 0.60 0.62 0.60 0.60 0.57 0.51 0.65 0.61 0.57 0.61 0.72 0.59 0.55 0.55 0.52 0.65 0.63 1.00 0.43 0.48 0.57 0.53 0.55 0.38 0.41 0.34 0.43 0.44 0.57 0.50 0.42 0.32 0.34 0.40 -0.21 -0.24 0.36
SMH 0.65 0.68 0.80 0.70 0.70 0.67 0.57 0.57 0.46 0.48 0.61 0.55 0.46 0.53 0.54 0.43 0.53 0.43 1.00 0.69 0.65 0.73 0.65 0.46 0.59 0.55 0.34 0.51 0.54 0.36 0.60 0.43 0.38 0.48 -0.16 -0.20 0.20
IAH 0.71 0.69 0.85 0.69 0.63 0.59 0.58 0.57 0.44 0.51 0.59 0.57 0.48 0.47 0.52 0.51 0.48 0.48 0.69 1.00 0.75 0.61 0.65 0.48 0.58 0.59 0.35 0.48 0.49 0.33 0.61 0.34 0.41 0.44 -0.16 -0.23 0.14
SWH 0.74 0.74 0.85 0.75 0.68 0.64 0.66 0.67 0.54 0.57 0.63 0.62 0.55 0.50 0.55 0.54 0.56 0.57 0.65 0.75 1.00 0.59 0.63 0.52 0.61 0.58 0.39 0.56 0.56 0.36 0.62 0.45 0.38 0.50 -0.21 -0.27 0.20
BDH 0.63 0.67 0.79 0.69 0.67 0.63 0.60 0.59 0.52 0.55 0.67 0.56 0.52 0.56 0.54 0.52 0.61 0.53 0.73 0.61 0.59 1.00 0.81 0.45 0.59 0.51 0.40 0.51 0.56 0.37 0.60 0.39 0.42 0.46 -0.13 -0.19 0.23
WMH 0.77 0.80 0.82 0.80 0.73 0.68 0.78 0.76 0.60 0.69 0.77 0.74 0.64 0.65 0.56 0.65 0.67 0.55 0.65 0.65 0.63 0.81 1.00 0.65 0.58 0.53 0.53 0.59 0.67 0.47 0.62 0.49 0.45 0.54 -0.13 -0.22 0.28
TTH 0.70 0.70 0.57 0.68 0.58 0.56 0.59 0.59 0.45 0.49 0.54 0.56 0.46 0.43 0.35 0.48 0.46 0.38 0.46 0.48 0.52 0.45 0.65 1.00 0.40 0.39 0.55 0.57 0.46 0.35 0.53 0.50 0.31 0.50 -0.18 -0.27 0.07
HHH 0.62 0.66 0.75 0.66 0.62 0.59 0.51 0.51 0.43 0.51 0.54 0.46 0.49 0.45 0.47 0.52 0.52 0.41 0.59 0.58 0.61 0.59 0.58 0.40 1.00 0.52 0.32 0.54 0.54 0.33 0.55 0.44 0.44 0.43 -0.17 -0.20 0.20
IIH 0.58 0.59 0.64 0.61 0.63 0.60 0.52 0.51 0.42 0.44 0.54 0.52 0.43 0.49 0.45 0.43 0.47 0.34 0.55 0.59 0.58 0.51 0.53 0.39 0.52 1.00 0.27 0.44 0.55 0.31 0.59 0.35 0.36 0.44 -0.15 -0.17 0.22
PPH 0.65 0.67 0.48 0.64 0.52 0.51 0.58 0.60 0.47 0.48 0.58 0.53 0.42 0.45 0.42 0.52 0.50 0.43 0.34 0.35 0.39 0.40 0.53 0.55 0.32 0.27 1.00 0.54 0.39 0.32 0.47 0.50 0.49 0.45 -0.07 -0.12 0.09
XLF 0.82 0.85 0.62 0.85 0.75 0.79 0.59 0.54 0.52 0.56 0.58 0.57 0.52 0.47 0.46 0.56 0.53 0.44 0.51 0.48 0.56 0.51 0.59 0.57 0.54 0.44 0.54 1.00 0.53 0.32 0.74 0.95 0.34 0.76 -0.15 -0.23 0.08
XLB 0.76 0.78 0.68 0.79 0.76 0.72 0.81 0.79 0.59 0.79 0.83 0.79 0.78 0.79 0.53 0.64 0.67 0.57 0.54 0.49 0.56 0.56 0.67 0.46 0.54 0.55 0.39 0.53 1.00 0.70 0.52 0.41 0.40 0.59 -0.31 -0.35 0.63
XLE 0.51 0.61 0.46 0.61 0.59 0.57 0.66 0.65 0.49 0.61 0.69 0.68 0.60 0.69 0.36 0.49 0.48 0.50 0.36 0.33 0.36 0.37 0.47 0.35 0.33 0.31 0.32 0.32 0.70 1.00 0.28 0.22 0.30 0.36 -0.26 -0.26 0.66
RTH 0.78 0.77 0.72 0.80 0.74 0.76 0.57 0.53 0.51 0.51 0.58 0.52 0.48 0.47 0.53 0.53 0.55 0.42 0.60 0.61 0.62 0.60 0.62 0.53 0.55 0.59 0.47 0.74 0.52 0.28 1.00 0.68 0.42 0.68 -0.18 -0.27 0.01
RKH 0.72 0.74 0.49 0.74 0.64 0.70 0.47 0.42 0.43 0.44 0.46 0.44 0.40 0.36 0.38 0.45 0.43 0.32 0.43 0.34 0.45 0.39 0.49 0.50 0.44 0.35 0.50 0.95 0.41 0.22 0.68 1.00 0.28 0.70 -0.08 -0.13 0.01
BBH 0.48 0.52 0.52 0.50 0.49 0.46 0.46 0.47 0.38 0.39 0.47 0.42 0.34 0.39 0.34 0.40 0.37 0.34 0.38 0.41 0.38 0.42 0.45 0.31 0.44 0.36 0.49 0.34 0.40 0.30 0.42 0.28 1.00 0.38 0.02 0.03 0.22
RWR 0.71 0.75 0.57 0.76 0.77 0.79 0.58 0.53 0.47 0.55 0.57 0.55 0.53 0.47 0.42 0.49 0.50 0.40 0.48 0.44 0.50 0.46 0.54 0.50 0.43 0.44 0.45 0.76 0.59 0.36 0.68 0.70 0.38 1.00 -0.08 -0.16 0.21
TLT -0.22 -0.22 -0.19 -0.23 -0.24 -0.23 -0.20 -0.20 -0.16 -0.25 -0.28 -0.24 -0.23 -0.29 -0.19 -0.18 -0.26 -0.21 -0.16 -0.16 -0.21 -0.13 -0.13 -0.18 -0.17 -0.15 -0.07 -0.15 -0.31 -0.26 -0.18 -0.08 0.02 -0.08 1.00 0.93 -0.13
IEF -0.30 -0.30 -0.27 -0.31 -0.29 -0.28 -0.26 -0.25 -0.18 -0.33 -0.33 -0.28 -0.31 -0.32 -0.20 -0.24 -0.30 -0.24 -0.20 -0.23 -0.27 -0.19 -0.22 -0.27 -0.20 -0.17 -0.12 -0.23 -0.35 -0.26 -0.27 -0.13 0.03 -0.16 0.93 1.00 -0.09
^XAU 0.26 0.32 0.25 0.33 0.34 0.30 0.53 0.52 0.36 0.55 0.55 0.53 0.58 0.62 0.32 0.34 0.41 0.36 0.20 0.14 0.20 0.23 0.28 0.07 0.20 0.22 0.09 0.08 0.63 0.66 0.01 0.01 0.22 0.21 -0.13 -0.09 1.00
 
      Cells Coloring      
  < 0.25   > 0.75  
*A high pairwise correlation hedged trade is a high Sharpe ratio
proposition, while a low pairwise correlation scenario is a high Alpha trade.

* Correlations are subject to the well-known phenomenon of inter-
temporal non-stationarity and sign inversion. As such they are
best utilized as an indicative and explanatory factor, rather than a
predictive factor.
The Pearson product moment correlation coefficient is calculated as follows:  
r12 = S(Yi1 - Y-bar1)*(Yi2 - Y-bar2) / [S(Yi1 - Y-bar1) 2 *S(Yi2 - Y-bar2) 2 ] (1/2)
     
r12 = s (1, 2) /s1s2              
Copying/Redistribution without permission is a violation of copyright laws 2005    http://AdvancedPortfolioSolutions.Com
This work is purely for the purposes of research and understanding financial market dynamics. Contact Pankaj Agrrawal, Ph.D. for clarification on any technical aspects of this research.