The Correlation of the Dollar Index with the Dow Jones index

In looking for the correlation between the US Dollar/USDX - Index - Cash (I:DXY0.NYB) and the DJ INDUSTR AVERAGE (^DJI) I discovered that the correlation at yahoo is almost perfect.  Well err ... it is perfect ... it's the same thing. 

Well i can't wait for yahoo to get their act together.  I found a good daily dollar index at CNBC here.  According to that the dollar lost 1.31% of its value today. 
The Dow on the other hand gained 2.79%.  Was most of the fizz in the Dow today caused by the dollar's drop?

Even more pertinant is the long term chart comparison of the dollar to the Dow (click on advanced charts).  As you would expect they are frequently inversely correlated.  The Dow in in red and the dollar is in blue.


Tags

  1. dow
  2. dollar
  3. financial
  4. currency
  5. yahoo
  6. cnbc
  7. tracking
  8. dollar dow tracking
  9. item 1175

Comments


Seth says
MR 2009-04-03 15:41:47 11725
Well visually they are inversely proportional at best. I can't get the trend lines to work very well. Anyway let me know if you figure out & apply such knowledge to make a killing in the stock market or as a currency trader.

Yep just like i said above: "As you would expect they are frequently inversely correlated."  I think you can frequently see it in the graph when the dollar is shaped like a cup and the stock is shaped like a mountain. But there is a lot of slippage and i don't know when the dollar is leading and when it is trailing, or else i guess i would be a millionaire.

Seth says
MR 2009-04-03 14:03:17 11725
seth 2009-04-03 13:41:37 11725
MR 2009-04-03 10:23:21 11725
Two things that affect the value of the dollar are not on your chart - balance of payments & the national debt. The stock market & the price of gold are ancillary.

This item is studying the effect of the dollar on the price of stocks, not the other way around.  Obviously where the price of stocks is measured in dollars, then when the value of the dollar drops, even if the value of the stock remains fixed, it's price measured in dollars will go up.  How much of the extra fizz in the stock market in late 2007 was due to a sinking dollar?
Well, I don't see them connected at all as does your chart.  The money supply & credit availability is more connected.

Well they are connected in the way i explained above.  I guess sometimes a thing is just too simple to see.  Another way to look at it is to think of the value of a dollar sinking by 90% ... would you not expect that the price of a loaf of bread would go way up?   Btw, it would be interesting to find charts that support the other correlations that you mention.

Seth says

Dollar jumped almost a penny  today and has been on the rise most of the month.  Good time to pay off all those pesky foreign bills.

In other news: both the stock market and oil are down.  Some say that is a reaction to the strength of the dollar.  But which is cause and which is effect?

Seth says
So today the market gained about 1.5% and the dollar lost about 1%.

Seth says
Dollar dropped to .81 and oil went up above $60.

louis vuitton online says
nice post!

Jordan says
Well, it simply goes like this, if the dollar drops to from its current value, surely the prices of numerous stocks will go up due to the rational difference of dollar to other currencies. This chart however is quite nicely created by Yahoo, but still it is not going to save you with any stock money from rising or falling. I should however say that itâ

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