Wednesday, January 1, 2020

Asset Class Correlation 2019

Now that it is 2020, we shall look back at 2019 to see how the various asset classes had performed for the whole year, using data from the Portfolio Visualizer site and respective ETFs representing the various asset classes. I also added the iShares MSCI Singapore Capped ETF (EWS) to show how our local equities fair against the rest.

Vanguard Total Stock Market ETFVTI-0.38-0.390.02-0.050.8830.67%
Vanguard Real Estate ETFVNQ0.38-0.380.250.390.2528.87%
Vanguard Total Bond Market ETFBND-0.390.38-0.590.26-0.338.83%
SPDR Gold SharesGLD0.020.250.59--0.050.1617.86%
iShares MSCI Singapore Capped ETFEWS0.880.25-0.330.160.00-14.53%

Fig. 1 – Correlation results based on monthly returns for the period 1 Jan 2019 – 31 Dec 2019. For full data click here.

The table in Figure 1 showed that while all asset classes, as represented by their counters, had produced positive returns for 2019, there is still negative correlation existing between some of them, e.g. between equities and bonds (-0.39). This leads to the conclusion that although negative correlation between asset classes exist, it does not necessarily mean that some enjoy gains while others suffer losses.

So for 2020 (and the years beyond), stay diversified. 

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