I've always maintained some diversification into Ag futures, though it seems that although in the long term they are less correlated to stock indexs, in the short term they can be very correlated (eg the way cotton, sugar etc all slumped with the market in August). In a sense it is the short term correlation that counts as this determines risk as they can drop very fast. Any comments?
Confirmation of the obvious?...............markets rally slowly and fall quickly. Excessive correlation can come about from excessive diversification. Speculators tend to trade from the "long" side of the market. Pizza should be cut "pie-style" through the center instead of "tic-tac-toe-rectangular" in squares.
I don't even consider correlation because I have no way of knowing if my positions will be highly correlated 3 months from now.
Sounds like you're using a single strategy in multiple markets. You would do well to consider diversifying strategies and timeframes as well as markets.