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Katchum
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Albert Sung is the author of Correlation Economics, monitoring breaking economic news on a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at Ashland, a... More
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Correlation Economics
  • Correlation: Australian Dollar Vs. Iron Ore Price 0 comments
    Aug 27, 2012 12:38 PM | about stocks: CROC

    Another correlation to add to our list:

    Positive correlation between AUD/USD Vs. Iron Ore price.

    => http://brazilianbubble.com/chart-the-correlation-between-iron-ore-price-and-the-australian-dollar/

    Very important correlation to trade on. If you see a disparity like this:

    (click to enlarge)

    You can bet that either iron ore prices will go up, or the Australian dollar will go down. So you can just put your money in both bets, you always win.

    Reasoning? If you bet the iron ore price goes up and you bet the Australian dollar goes down you will at least get it right for one of the two. It can't be that the gap widens in the correlation, the gap always narrows to the equilibrium point. If iron ore prices do go down, you will at least make money on the Australian dollar plunging.

    Stocks: CROC
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