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It probably comes as no surprise to you to know that various markets are correlated, that is the prices seem to move in tandem. Many of these markets are obvious, but even so they are worth bearing in mind if you are looking to trade on any of them. It is easy to forget when focused on one security to check on other correlated securities.
For instance, you tend to see the price of gold and of silver going up or going down together. In fact, some traders look for a fixed ratio between the two metals, and consider that there may be a correction due in one or the other if it deviates much from a historic multiple. Throughout the 20th century, the ratio was about 1:50, which means that gold costs about 50 times as much as silver. It has not always been at that level, and sometimes the value will fluctuate wildly, but generally the average will only change slowly over time, if at all.
The reason for the correlation is easy to understand. If someone is in the market for buying precious metals, perhaps because paper currency is going out-of-favour during a period of high inflation, then they will possibly think first of gold. If demand for gold increases, and the price goes up, then silver looks like a bargain and some of the demand will shift over with the inevitable consequence on silver's price. To some extent, as precious metals, gold and silver can be considered interchangeable to the investor.
Another concept associated with correlation is that of one investment tending to lead the price movement for the whole sector. For precious metals, it seems that price of palladium often precedes either gold or silver, so if palladium goes up you can expect both gold and silver prices to follow soon after.
You can see the correlation effect in a number of different markets. Looking at financial indices, the DAX and the FTSE index will often move in tandem. In this case, often the DAX is the leader for the European indices. The American stock indices, of which there are several, will usually go up or down together. This includes the Dow Jones Industrial Average, the NASDAQ, the S&P 500, and the Russell. Of course, as some of these have different size companies there can be some discrepancies in movement, but generally the others will follow the Dow, as the most respected and longest standing index.
If you are trading commodities, you can again look for similar products that would be substitutes. Wheat, grain, oats, and corn are similar agricultural products, and would tend to move in tandem because each could be to some extent an alternative to another if the price changed. An additional reason for a correlation between these is that, as agricultural products, they would be similarly affected by any climate issues, for instance if there was a bad harvest for one it could very well affect the others, creating an overall shortage which would push all the prices up.
Anytime you are trading, you should be on the lookout for correlated products and markets, and make sure that you pick up any early signs of movement in one which may be echoed in the trades you are taking.