Weekend Charting and Chat - 28 August 2015, page-46

The following chart shows correlations of the XAO with some of the biggest stock markets in the world and most of the important East Asians.



A few weeks ago, correlations were weak (between 0.2 and 0.4) or insignificant (between 0 and 0.2).   Best correlations were with some of the smaller European markets (e.g., Vienna and Amsterdam) and some of our East Asian trading partners.   Correlations with America tended to be insignificant.

With the recent market turmoil, correlations over the past 30 days have improved.  Correlations with America are still only in the "Weak" category.

Best correlations are with the Europeans:  France, Italy, Spain and the UK.  NZ is on a par with France and the UK.  Close behind are Canada, India and Singapore.  

The high correlations with Canada and NZ make sense as both, like Australia, are developed countries dependent to a large degree on the export of commodities.

Correlations range from -1 to +1.  +1would be perfectly correlated.  That's very rare.

The qualitative verbal notations are standard in statistics:

0.9 to 1 Very Strong
0.8  to 0.9 Strong
0.6 to 0.8 Significant
0.4 to 0.6 Weak
0.2 to 0.4 Very Weak
0 to 0.2 Insignificant.

RB

RB.