<p>When JNK appeared on the market on Dec 04 2007 it started at approximately the same price level at SPY (143 vs 146). It is however not true that after this they moved together. I downloaded the price data and calculated the correlation of the price differences* for the first 180 days. The correlation coefficient was -0.0526.</p>

<p>They seem to move together because</p>

<ol>
<li>both fell during the financial crisis</li>
<li>in Dec 2007 the prices were roughly the same</li>
<li>later the two prices drifted apart, this increases the scale and makes it hard to discern visually what happened in the early days.</li>
</ol>

<p>So in essence this is an optical illusion.</p>

<p><sub>*I did not run statistical tests for integration, but this seems very likely. Calculation was done in R using <code>cor(diff(SPY$Close[1:180]),diff(JNK$Close[1:180]))</code>. 
</sub></p>

CC BY-SA 4.0
2019-07-27T06:12:05.417Z
2019-07-30T11:10:03.757Z
2019-07-30T11:10:03.757Z
Giskard
<p>I am looking at the graph of <a href="https://finance.yahoo.com/quote/JNK/" rel="nofollow noreferrer">JNK</a> and <a href="https://finance.yahoo.com/quote/SPY/" rel="nofollow noreferrer">SPY</a> prices close prices since 2008.  From 2008 to 2011, the two prices seem to move together.  However, somewhere in the beginning of 2012, the prices all of a sudden began to move in opposite directions.  Does anyone know the reason for this?  A picture is provided below. </p>

<p><a href="https://i.sstatic.net/3nzum.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/3nzum.png" alt="enter image description here"></a></p>

CC BY-SA 4.0
2021-09-30T03:06:19.167Z
You are observing that from 2007 to 2012 the levels were similar. That is not actually an analysis of whether they have a general tendency to move in the same direction or opposite direction. For example if SPY experiences +10% in January and -10% in February, while JNK experiences -10% in January and +10% in February, they would end up at nearly the same level but in my example they are negatively correlated, that is, they tend to move in opposite directions. You have plotted levels. This is probably not the best way to study changes.
H2ONaCl
<time-series><nonexpert><bonds>
JNK and SPY price movements question
MathIsLife12
# JNK and SPY price movements question

(Asked by: username_0 on 2019-07-26)

I am looking at the graph of [JNK](https://finance.yahoo.com/quote/JNK/) and [SPY](https://finance.yahoo.com/quote/SPY/) prices close prices since 2008. From 2008 to 2011, the two prices seem to move together. However, somewhere in the beginning of 2012, the prices all of a sudden began to move in opposite directions. Does anyone know the reason for this? A picture is provided below.

[![enter image description here](https://i.sstatic.net/3nzum.png)](https://i.sstatic.net/3nzum.png)

**Tags:** time-series, nonexpert, bonds

> **Comments:**
> **username_1**: You are observing that from 2007 to 2012 the levels were similar. That is not actually an analysis of whether they have a general tendency to move in the same direction or opposite direction. For example if SPY experiences +10% in January and -10% in February, while JNK experiences -10% in January and +10% in February, they would end up at nearly the same level but in my example they are negatively correlated, that is, they tend to move in opposite directions. You have plotted levels. This is probably not the best way to study changes.  

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## 1 answers

### Answer by username_2 on 2019-07-27. Score: 1

When JNK appeared on the market on Dec 04 2007 it started at approximately the same price level at SPY (143 vs 146). It is however not true that after this they moved together. I downloaded the price data and calculated the correlation of the price differences\* for the first 180 days. The correlation coefficient was -0.0526.

They seem to move together because

1. both fell during the financial crisis
2. in Dec 2007 the prices were roughly the same
3. later the two prices drifted apart, this increases the scale and makes it hard to discern visually what happened in the early days.

So in essence this is an optical illusion.

\*I did not run statistical tests for integration, but this seems very likely. Calculation was done in R using `cor(diff(SPY$Close[1:180]),diff(JNK$Close[1:180]))`.


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