Thursday, 4 July 2013

Amazing correlation: Nikkei ratio to 2x inverse Yen fund is almost constant. 2013-07-05

I like looking at ratios sometimes especially using's handy ratio feature on the charts.

For a little whilwe I have been watching the correlation of the Nikkei 225 stock market index to the Japanese Yen. Yen down means Nikkei up basically. Trash the Yen, the Nikkei flies.

OK, so I tried to find a brearish Nikkei fund. I found to my somewhat amazement that the Nikkei 225 divided by the ProShares Ultra-Short Yen fund (YCS) is very close to being a constant over the last 2 years or more.

So, why buy the Nikkei when you can just short the Yen, eh? Or vice versa? It would be fascinating to know which is better to trade!

Also, a quick look again at the Nikkei vs the Dollar:Yen exchange rate, rescaled to suit:

Nice positive correlation, except for a bump in mid-June.

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