How Do Asset Classes Correlate With Each Other?

Understanding the intermarket correlations across asset classes and the role of ETFs in trading are key in building diversified portfolios and managing risk.

• Question 01

  What is asset class correlation?

  Your Answer

  • A.The measure of an asset's volatility

  • B.The extent to which prices of different assets move in relation to each other

  • C.The price difference between two asset classes

  • D.The risk associated with a specific asset class

• Question 01

  What do positive and negative correlations indicate between two asset classes?

  Your Answer

  • A.Both move in the same direction; they move in opposite directions

  • B.Both move in opposite directions; they move in the same direction

  • C.Both move randomly

  • D.Both have stable prices

• Question 01

  How do changes in interest rates impact the real estate market?

  Your Answer

  • A.Increase demand for mortgages

  • B.Decrease demand for mortgages

  • C.Have no impact on the housing market

  • D.Make borrowing more expensive

• Question 01

  What does the Dollar Index measure?

  Your Answer

  • A.The value of the US dollar relative to a basket of foreign currencies

  • B.The strength of the euro

  • C.The value of gold

  • D.The performance of the derivatives market

• Question 01

  What is the largest portion of the Dollar Index basket?

  Your Answer

  • A.Japanese yen

  • B.Euro

  • C.British pound

  • D.Canadian dollar

• Question 01

  How does the Dollar Index relate to the movement of the euro?

  Your Answer

  • A.No correlation

  • B.Highly correlated

  • C.Inversely correlated

  • D.Random correlation

• Question 01

  Why is it crucial to consider intermarket correlations when selecting assets for trading or investment?

  Your Answer

  • A.To guarantee profits

  • B.To diversify the portfolio effectively

  • C.To rely solely on technical analysis

  • D.To ignore market conditions

• Question 01

  What can cause changes in intermarket correlations?

  Your Answer

  • A.Economic conditions

  • B.Geopolitical events

  • C.Monetary policy decisions

  • D.All of the above

• Question 01

  What is the main takeaway about intermarket correlations?

  Your Answer

  • A.They are always static

  • B.They are irrelevant for trading strategies

  • C.They can change over time as market conditions change

  • D.They guarantee profits in any market condition

• Question 01

  How does a strong dollar impact companies relying on commodity inputs?

  Your Answer

  • A.Has no impact

  • B.Leads to lower production costs

  • C.Leads to higher production costs

  • D.Guarantees profits for companies