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This Thread is for a question about the Russell 100 and S&P...

Discussion in 'Trading' started by cml2949, Mar 16, 2006.

1. cml2949

I hear that there is a 99% correlation between the Russell 100 and the S&P.. Anyone have any ideas? Please show links if you have any..

CML

2. jim c

we are a MM firm...currently we have the RL to SP correlation at about 89%. jim

3. cml2949

Hey Jim how did you arrive on that percentage? Is there a way to confirm that to me?

Thanks

4. acrary

For the year 2005 the daily correlation between the SP and RL was 92.7.

5. cml2949

Thanks for the info.. How can you confirm that?

CML

6. acrary

Setup a Excel spreadsheet. Enter the closing price of the SP in column 1 for each day of the year. In column 2 enter the closing price of the RL for each day of the year.

In column 3 at the bottom enter =correl(a1:a253,b1:b253)
(253 is the number of days in the year)
Multiply the number by 100 and you'll get 92.7 for 2005.

This can also be done on intraday data by selecting a timeframe (5min., 10min. etc.) and populating a database. Then write a program to compute the correlation.

7. cml2949

Thanks for the advice.. I tried it for FEB and got little over .997..

CML

8. man

usually correlation is calculated on percentage changes rather than price itself.

9. squeeze

Or of the daily returns:

ln(P[0] / P[1])

which is close to the percentage change.

10. cml2949

would you suggest using percentages in the same formula as explained in this thread thus far?

#10     May 8, 2006
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