Mirages & Correlations

I love a good correlation.

Not to be confused with a chlorination nor a coronation.

Putting any dyslexia aside……

correlations should not be used in isolation when forecasting asset prices and sometimes a correlation doesn’t always exist.

Whilst the ASX 200 carries notable weightings in commodity related companies, it doesn’t automatically relate to a correlation with the inverse travel in the U.S. Dollar.

(it is common logic that a declining USD translates into higher commodity prices)

The study below shows that the ASX 200 can rally while the U.S. Dollar is also rising.

Beyond the other companies of meaningful market capitalisation within the ASX 200, factors such as a weaker AUD can be a positive for the earnings of the commodity related stocks.

September 6, 2023

by Rob Zdravevski

rob@karriasset.com.au