Chinese Yuan vs other 'commodity currencies'

Feb 28, 2010 in Currencies | Emerging Markets

The Chinese Yuan is pegged to the US Dollar --- with occasional 'adjustements' or small revisions by the Chinese government.   This chart shows a general, vague idea of what 'may' be the movement of the currency if it were allowed to float.   Both the Australian Dollar (developed market) and the Brazilian Real (emerging market) are considered 'commodity currencies' and are in a way comparable to China.

To see other timeframes for this relationship,  type CYB BZF and FXA into the text boxes and push the 'Compare Returns' button here:


3 different ETFs off the general public radar

Feb 27, 2010 in Currencies

 These 3 'different' markets all showing remarkably similar return and risk profiles --- symbolizing broader forces at work:



Consumer Staples as a defensive theme for a developing global marketplace.

Feb 26, 2010

Lower vol sectors like consumer staples outperform in down market and gives absolute return in up markets. Classic characteristics of absolute return strategies.


Correlations During Crisis

Feb 24, 2010 in Commodities | Correlation

I know that this may be implied by others --- but its not enough that something simply be non-correlated to be included in a portfolio. It also needs to have positive expected return. 

Structurally speaking, commodities markets are both 1) quite volatile and 2) generally quite sensitive to the overall economy -- which is what the stock market is sensitive to. In times of crisis, its been shown over and over again that correlations generally rise, so that you thought you were getting non-correlation, but instead you just get a more volatile asset that delivers an even larger drawdown for your portfolio. An excellent example is what just happened with crude oil in 2008, see images:


Europe vs S&P 500 --- its a matter of currency effect

Feb 22, 2010 in Currencies

European indexes have generally tracked the S&P 500 when adjusted for currency.

Alter time periods and/or change symbols here:


ETF Statistical Distributions

Feb 20, 2010 in Volatility

Examples of the statistical risk-profiles of the S&P 500 and the Aggregate Bond Market (AGG). I have added the 2x Leveraged S&P 500 ETF as an example of going the wrong direction. The goal is to create a portfolio with low standard deviation and relatively high returns. Sound familiar? Yes, these are the core components of the sharpe ratio. The S&P 500 has never had an attractive sharpe ratio.


Using ETFreplays data visualization tools to understand financial relationships -- EEM Focus

Feb 06, 2010 in Emerging Markets

Options market makers use daily volatility as their measure of how to handle securities with different sensitivities to broad events and market moves.   Getting a basic understanding of volatility can be quite useful when thinking about how to weight your holdings.    If you expect high returns, then high volatility is fine  --  you are expecting to be paid for the risk.   A major problem would be owning securities that are very volatile but you do not expect them to offer high returns.  

The Emerging Markets Index (EEM) has been more volatile from a daily standard deviation perspective every month for the last few years.   There has been no change in this in 2010.    Looking at the returns by month as in the first chart shows how this YTD period is hardly an unexpected outcome.

Our layout at has been designed to offer visual representation of data.   Financial relationships are much easier to understand with a well laid-out chart than a set of numbers in a data table.



To vary the timeframe of the above analysis and gain deeper understanding of this relationship, visit: ETF Charts


ETF Credit Spreads

Feb 04, 2010 in Credit Spreads

This chart compares ETF's with similar durations and varying credit quality. From treasuries to investment grade bonds to high-yield bonds. The chart below shows the direction of credit spreads -- in an intuitive total return chart. All distribution adjustments are made for you -- do not expect a price chart found on most websites to be able to do this analysis.


S&P 500 Dividends

Feb 03, 2010 in S&P 500 | Yield

Historical dividend yield for the S&P 500.   The decade began with very low yield and increased sharply as dividends (and earnings) grew.



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