In keeping with HedgeHunter’s recent “Cluster Weighting” presentation, finding low correlated ETFs to pair with equity ETFs is essential. The following correlation matrix shows a mixture of highly correlated securities along with modest and low correlated ETFs. Only SDS is negatively correlated and that is strictly due to it being a short ETF. In other words, it is designed to move opposite any market move.
Correlation Matrix: ETFs with the yellow background (80% or higher) are considered to be highly correlated. The white background (SDS the exception) are medium or modestly correlated. Those with the blue background (40% or lower) are the low correlated securities. I assigned equal percentages, something that does not occur in a real portfolio, so readers could see how the different ETFs are correlated when placed in the context of a portfolio. The time frame is three years of data. I prefer to use five years, but at least one ETF did not have sufficient historical data to use the longer period.