The Baltic Dry Index

The Baltic Dry Index (BDI) (shipping) is often used as a way to monitor economic health. The rationale is that when shipping is in demand, its assumed that goods must be moving though the economy. All things being equal, it is better for stocks when the Baltic Dry Index is healthy.

First(white) line for BDI; Second (orange) Dow Jones Ind. Avg; Third (yellow) S&P 500

However, when I was checking the correlation of the BDI with DJIA & S&P 500, following is the result what I found.

From 2007 till date, the correlation of BDI  
with DJIA (-)0.028

with S&P (-)0.009

From 2009 Start till date, the correlation of BDI 
with DJIA (-)0.072

with S&P (-)0.058

Now this is what I call as true diversification. (Watch out my blog, soon i am going to post new article on "Stock Diversification").

By the way for those who think that correlation b/w DJIA and S&P 500 is one, NO its not. The correlation b/w both of them is 0.986, though the difference is minute it still counts.

 

For you info. the correlation for all the three become positive only from June 30th  (third graphs). 

So whats the conclusion. My conclusion is that the economies around the world have started the recovery process and the ships too have started to sail out of the yards, the movement in BDI. 

Rest can be decided on your own. 

Happy Investing!!