Correlation with stocks and bonds

[jonta999]

What is the sign and the magnitude the correlation of these asset classes with stocks and bonds
1. Private real estate
2. Public real estate
3. Commercial property
4. Commodities

 

[Zigzag]

Its not as simple as you put it, but if you want an overly simplifying answer I’d say all should be positevly correlated, except for commodities. They all relate through the same economic factors: interest (discount factor) and they are all demanded when economy is good. In general. inflation works against equity and bonds, but works for real estates. Commodities are all over the place .

 

[Flashback]

In general, inflation doesn’t work against equities nor RE investments. Futhermore, commodities are very broad category. Some of industrial basic materials may have high correlation with equities for example, other may have negative correlation (f. ex. gold). There is one more problem for international exposure to commodites. The prices of almost all commodites are in USD, so you have a risk against USD in commodity portoflio.

 

[jonta999]

Thanks. Any other expert comments?

 

[Gergely]

See answer in Curriculum Volume 5 Page 14.