🔍 Hidden Correlation Finder
Discover which ETFs move together and which don't. Build a truly diversified portfolio by finding ETFs with low correlations. See the correlation matrix heatmap and get your diversification score.
Understanding ETF Correlations
What is Correlation?
Correlation measures how two ETFs move together. It ranges from -1 to +1:
Perfect Positive Correlation
ETFs move exactly together
Example: SPY and VOO (both track S&P 500)
High Positive Correlation
Strong positive relationship
Example: QQQ and XLK (both tech-heavy)
Moderate Correlation
Some relationship but meaningful diversification benefit
Example: SPY and EEM (US vs emerging markets)
No Correlation ✅
ETFs move independently - Great for diversification!
Goal: Find assets with zero or negative correlation
Negative Correlation 🎯
ETFs move in opposite directions
Example: Stocks and bonds often move inversely
Perfect Negative Correlation 💎
When one goes up, the other goes down by the same amount
Rare: Hard to find perfect negative correlation in real markets
Why Does Correlation Matter?
Diversification only works if your holdings aren't correlated! Many investors think they're diversified by holding SPY, VOO, and IVV... but these have 0.99+ correlation (they're essentially the same fund).
💡 Pro Tip
For true diversification, aim for correlations below 0.7 between your holdings. Combine US stocks (SPY) + International (EFA) + Bonds (AGG) + Emerging Markets (EEM) to build a resilient portfolio that won't all crash together.
Common Correlation Patterns
| Comparison | Correlation | Interpretation |
|---|---|---|
| SPY vs VOO | 0.99+ | Identical (both track S&P 500) |
| QQQ vs XLK | 0.92 | Both tech-heavy |
| SPY vs EEM | 0.65 | Moderate (US vs emerging markets) |
| SPY vs AGG | 0.15 | Low - stocks vs bonds ✅ |
| TLT vs SPY | -0.20 | Negative - bonds rise when stocks fall 🎯 |
How to Use This Tool
- Select 3-6 ETFs you're considering for your portfolio
- View the correlation matrix: Red = high correlation (bad for diversification), Green = low/negative correlation (good!)
- Check your diversification score: Higher score = better diversified portfolio
- Get recommendations: We'll suggest ETFs to add that reduce correlation
Building a Diversified Portfolio
A well-diversified portfolio typically includes:
US Large Cap
Core holding for portfolio
International
Correlation ~0.65 with US ✅
Bonds
Correlation ~0.15 with stocks 🎯
Emerging Markets
Correlation ~0.60 with US ✅
Sector ETFs
Targeted exposure
Specialty
Alternative assets
✅Example Well-Diversified Portfolio
Allocation:
- • 40% US Large Cap (SPY or VOO)
- • 20% International (VXUS or VEA)
- • 20% Bonds (AGG or BND)
- • 15% Emerging Markets (EEM)
- • 5% Specialty (ARKK or sector ETFs)
Why it works:
- • Average correlation < 0.60
- • Bonds provide downside protection
- • International reduces US concentration
- • Won't all crash together in a downturn
Want to Compare Specific ETFs?
See detailed holdings overlap and individual correlations between any two ETFs.
Compare ETFs →