Correlation Matrix update - 2009!

I have decided to share with you all an update to my correlation matrix for the end of the 2009 year. It is based off continuous contracts and the daily settlement prices over the last 12 months. There are bound to be some numbers that shock some.

Good trading and may all your trades have fat tails and flat distributions

KT

Disclaimer

Pair Trading - Gold vs Silver Long Term Mean Reversion!

For those Pairs traders its time to think about reversing some long term pairs positions on GC vs SI as this chart highlights that that GC vs SI pair is coming back to the long term mean of 59 on the ratio trade. Those that set position at +3 Standard Deviation or greater nice trade!

Current Ratio on close of Friday was 61.20 with Long term mean 58.81 while +/-3SD is at 82.75 to 34.87 on the chart from Oct ‘08 through to Dec ‘08 positions were set above 75.

Now to watch for the unwinding of positions buying GC and Selling SI on the unwind.

Good Trading and stick to your stops

KT

Disclaimer