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Show HN: Find the 10 highest and 10 lowest correlations to any stock

betagainst.fun

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Show HN: Find the 10 highest and 10 lowest correlations to any stock

#1

Post by macco »

During the start of the year I was thinking how could I bet against certain stocks (in my case mainly Tesla) without using derivatives and the risks that come with them.

After I had success betting on the oil price with a highly correlated investment fond, I came to the conclusion that negative correlations could be used to bet against the price of other assets. Unfortunately, it is not easy to find correlations between assets if you don't know which assets to compare in the first place.

So I created a website where you can find the 10 highest and 10 lowest correlations of certain assets.

Show HN: Find the 10 highest and 10 lowest correlations to any stock
betagainst.fun

Re: Show HN: Find the 10 highest and 10 lowest correlations to any stock

#6

Post by omarhaneef »

I wonder if correlation is the best measure. Cointegration might be more important for this sort of trading. And might be a supplementary measure you want to add since you’re doing all the pairwise comparisons. (If I recall there is a computational shortcut that helps)

Re: Show HN: Find the 10 highest and 10 lowest correlations to any stock

#7

Post by tdehnel »

I’ve often wondered the same thing, good on you for actually doing it.

That said, in any set of 20+ variables there will be a 10 highest/10 lowest correlating.

Without a good (specific, hard to vary) explanation as to why the correlation happens, I would not use this information to gamble real money.

Re: Show HN: Find the 10 highest and 10 lowest correlations to any stock

#8

Post by Bostonian »

"We calculate the correlations between 2 securities on the daily closing values of the last 20 years."

It's better to correlate daily returns than daily prices, since the latter are nonstationary, and I suggest using 1 year of daily returns rather than 20 since correlations do change over time. When I worked as a financial quant no one looked at 20 year correlations to measure near-term risk.

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