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David Becker

David Becker is a consultant and portfolio manager specializing in hedging in the energy and commodity markets. He was previously a Managing Director and Global Head of the Citigroup Commodity Group and Portfolio Manager and Managing Director for D.B. Zwirn

An almost daily occurrence in the life of a hedge fund analyst is understanding the impact of a potential event on specific stocks. Here are three examples of potential events and the questions it poses:

  • I believe home sales may slow. What stocks are most likely to be impacted?
  • I believe Gold may increase. What stocks could benefit from the increase?
  • I believe Oil prices may fall. What stocks will be dragged down as a result?

Admit it. As a hedge fund analyst, you think you know the answers to these questions but don't actually know the answer based on real data.

To answer these precise questions with data, not with gut and intuition, Raltin runs 2.5 billion correlations on 40,000+ stocks, ETFs and mutual funds to find the most correlated securities for a given stock, ETF or mutual fund. The answers to these questions can be answered by simply searching for the relevant ETF that embodies the underlying event i.e. XHB (Home Sales), GLD (Gold) & USO (Oil) on Raltin.com

The below table shows the most correlated stocks or the most likely to get impacted for each of the questions posed earlier

5 MOST CORRELATED STOCKS TO XHB - HOMEBUILDERS INDEX

TickerStock NameCorrelation with XHB (Home Builder ETF)
LENLennar Corporation0.81
TOLToll Brothers, Inc.0.79
DHID.R. Horton, Inc.0.78
PHMPulteGroup, Inc.0.78
MDCM.D.C. Holdings, Inc.0.77

5 MOST CORRELATED STOCKS TO GLD- SPDR Gold Trust

TickerStock NameCorrelation with GLD (SPDR Gold Trust)
ASAASA Gold and Precious Metals Limited0.74
ABXBarrick Gold Corporation0.72
AEMAgnico Eagle Mines Limited0.72
GGGoldcorp Inc.0.7
FNVFranco-Nevada Corporation0.7

5 MOST CORRELATED STOCKS TO USO - Oil Fund

TickerStock NameCorrelation with USO (Oil Fund ETF)
ERFEnerplus Corporation0.7
BTEBaytex Energy Corp0.69
STOStatoil ASA0.68
VETVermilion Energy Inc.0.68
CNQCanadian Natural Resources Limited0.68

After seeing the results, some of these results seem intuitive and obvious but others may seem surprising. For example, the canonical example for an Oil and equity pair trade was always Exxon Mobil (XOM). However, Raltin’s data shows that XOM has only a .53 correlation to USO Oil ETFs and prices.

So, the next time, someone at your fund comes up with a Peter Gregory type of sesame seeds type correlation question, just login to Raltin.com and get the answers in less than a minute.


To know more, you can contact Raltin by email at raltin@raltin.com or by completing this form.