What is the closest anyone has come to finding an pair of stocks with a correlation of -1 (or as close as possible)?
Has anyone successfully found a stock (or passive/low-fee ETF) with a strong inverse correlation to the ASX200 over the long term?
My goal is to have just 2 stocks or funds in my portfolio. (ie, no cash).
Stock A and Stock B are "strongly inversely correlated".
Let's call these stocks "Stock A" and "Stock B".
I want to maintain 50% of the value of my portfolio as Stock A and 50% of the value of my portfolio as Stock B.
When stock A rises above it's fair value, I expect stock B to fall by roughly the same amount from it's fair value. Stock A will therefore represent > 50% of my portfolio's value, while Stock B will represent < 50%.
At such a time, I want to sell a proportion of Stock A and immediately purchase more Stock B.
In doing so, I will have achieved my goal of keeping 50% of the value of my portfolio as Stock A and 50% of the value as stock B, respectively.
What do you think about this hedging strategy?
Would it be effective and cost effective?
I think the most important aspect of this strategy, is the choice of stocks.
==> Can anyone provide some thoughts on how to find stocks with a strong inverse correlation?
