This tool shows how Treasury ETF correlations with the S&P 500
change across inflation environments. Each panel plots one ETF's
rolling daily-return correlation with SPY (y-axis) against a
breakeven inflation measure (x-axis). Each dot is a point in
time; the most recent observation is highlighted in red.
Instructions
- select a Horizon for the rolling correlation lookback (1 Mo, 3 Mo, 6 Mo, 1 Yr)
- select an Inflation measure (10 Yr Breakeven or 5 Yr Breakeven)
- the chart updates automatically — six panels show SHV through TLT ordered by maturity
How to Read It
- upper-right quadrant — high inflation + positive stock correlation (bonds move with stocks, poor diversifier)
- lower-right quadrant — high inflation + negative stock correlation (bonds hedge stocks even in inflationary periods)
- lower-left quadrant — low inflation + negative stock correlation (the classic "flight to quality" regime)
- dots near zero on the y-axis mean the ETF's returns are independent of stocks at that inflation level
Use Cases
- identify which Treasury maturity best diversifies equities in the current inflation environment
- compare short-duration (SHV, SHY) vs long-duration (TLH, TLT) hedging behavior
- use alongside Portfolio to inform bond allocation decisions
Notes
- breakeven rates are daily, market-implied inflation expectations derived from TIPS pricing
- ETF data starts circa 2002; breakevens from 2003. Effective data start depends on lookback window
- longer lookback windows produce smoother correlations; shorter windows are noisier but more responsive