Screening For Correlation

One of the tools I've been playing with more recently is SmartMoney's correlation tracker and I find it very useful. If you like finding correlating price movements (both high and low) for individual stocks and ETFs, this tool is one of the best I've used.

For example, say I want to find a stock that has a high-correlation with U.S Global Investors (GROW), a stock I currently own in my retirement account. Just plug the ticker in and the tool spits out 10 stocks with both high and low correlations (including ETFs). This is good for spotting stocks or ETFs that you would normally overlook. For example, I've never even noticed Ambassadors Internat (AMIE) before this screen and that has been a huge winner this year. I also find it interesting to see which ETFs closely match GROW's performance.

There are numerous ways you can utilize a tool like this and your imagination can run wild. I've been use the tool to identify patterns in the stocks I like. For example, everyone is bullish on Google (GOOG), but did you know over the past 6 months stocks like CAL, EXPO, HRZ, JCP, and CHFN have been moving in tandem with GOOG? What about finding other consistent winners like China Life (LFC)? A quick screen says that I need to look at shares of BAP, CMRG, CPV, INFY, MS, and NCT. Now that's a tool I can use!

* If you don't want to pay up for a subscription to SmartMoney Select, the exact same correlation tracker can be found at SPDRindex.com. A big thank you to the reader who pointed this out!