A Correlation Worth Noting? | Forex Factory

  • A Correlation Worth Noting?

    From ritholtz.com

    The folks at the St. Louis Fed – about whom I can’t say enough good things — produce a proprietary Financial Stress Index, a full explanation of which can be found here [PDF]. A full deconstruction of the Index is, frankly, a bit above my pay grade. What’s not, though, is exploring the correlation of the Index to the S&P500 and discovering that while it’s generally well-correlated, that correlation has increased dramatically since the recession began at the end of 2007, as can easily be seen in the chart above. (I’ve inverted the S&P500 to better display the correlation.) The question I need to explore, ... (full story)

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ssshhhh
Feb 13, 2012 1:12pm — Edited
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no. the s&p graphic is inverted. shows the St. Louis Financial Stress Index with only a correction of the main trend (up),that is, this means that if the upward trend continues in this index, stocks will fall. Dollar and bonds will rise.
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tobinare
Feb 13, 2012 11:50am
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I'm confused.

The article concludes that there is a correlation between this Fed index and the S&P and that the index points to a higher S&P. The chart shows the index is moving down, assuming the correlation is true shouldn't the S&P move down? How is this positive?
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Trader#41B6
Feb 13, 2012 11:11am
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oh my God...it's an article talking about something positive in the market...how did this sneak thru? we blog readers only want doom and gloom...
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