Asset Correlations between Countries

Bond Correlation Matrix

The following table shows return correlations for the various bond terms (as represented by exchange traded funds) over the past two years.

		SHV	SHY	IEI	IEF	TLH	TLT	LQD	HYG	MUB	EMB	Return1	StdDev2
iShares Barclays Short Treasury Bond	SHV											0.1%	0.0%
iShares Barclays 1-3 Year Treasury Bond	SHY	0.04										1.0%	0.1%
iShares Barclays 3-7 Year Treasury Bond	IEI	-0.02	0.82									5.4%	0.3%
iShares Barclays 7-10 Year Treasury	IEF	-0.03	0.71	0.94								10.0%	0.5%
iShares Barclays 10-20 Year Treasury Bd	TLH	-0.04	0.61	0.88	0.97							12.6%	0.7%
iShares Barclays 20+ Year Treasury Bond	TLT	-0.03	0.51	0.79	0.91	0.97						16.9%	1.2%
iShares iBoxx $ Invest Grade Corp Bond	LQD	-0.05	0.53	0.68	0.69	0.67	0.65					7.5%	0.4%
iShares iBoxx $ HY Corp Bond Fund	HYG	0.05	-0.17	-0.34	-0.45	-0.50	-0.50	0.01				6.6%	0.7%
iShares S&P National AMT-Free Muni Bd	MUB	0.06	0.20	0.25	0.26	0.25	0.23	0.33	-0.01			5.6%	0.4%
iShares JPMorgan USD Emerging Markets Bond	EMB	0.04	0.01	-0.03	-0.09	-0.14	-0.13	0.25	0.50	0.09		7.1%	0.4%
iShares Barclays MBS Bond	MBB	-0.05	0.64	0.74	0.73	0.68	0.61	0.61	-0.22	0.27	0.09	3.7%	0.2%

Select Period:

Intra-portfolio diversification	= 0.28
Portfolio return	= 7.1%
Start Date	= 2010-05-18
End Date	= 2012-05-17

Each cell represents the correlation between the two corresponding assets.

Cell Color	Description	Diversification Benefit
-0.65	Asset pair with negative correlation	Excellent Diversification
-0.15	Asset pair with slight negative correlation	Good Diversification
0.2	Asset pair with mild positive correlation	Moderate Diversification
0.8	Asset pair with strong positive correlation	Poor Diversification

1 Returns for periods greater than a year are annualized.

2 Standard deviations are for daily returns.