Tuesday, October 23, 2007

S&P 500 and Sector Correlation with the Price of Oil

Whether you think oil is going higher or lower, it helps to know the correlation between the commodity and various asset classes. Below we provide the correlation between oil and the ten sectors of the S&P 500. The chart highlights the 5-year correlation between the weekly percent change of oil and the sectors. Not surprisingly, Energy is the only sector that is positively correlated with the commodity at 0.40 (1.00 means the two moved exactly inline with each other). The S&P 500 is negatively correlated at -0.16. Oddly, Consumer Staples and Health Care (made up of stocks that consumers need regardless of the price of oil) have been the most negatively correlated with the commodity over the last 5 years.


For those interested, below is a table of the correlations with oil over various time frames. We've seen some slight divergences between a few sectors and the commodity over the last year, but in general, the correlations are pretty similar over the different time frames.


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Lunch is for wimps

Lunch is for wimps
It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another.