[MrGimp]

So I noticed that Oil has been inverse of the financial sector. Its not entirely a 1 to 1 ratio...but thats rare with stocks anyways. But the correlation is still entirely visible. Now, Commodities (I had thought) were pretty much supposed to be inverse the dollar. That is the explanation for oils boom at least...that as the dollar fell OPEC had to charge more per barrel to make the same profit. BUT...look at the chart of the USO vs the dollar index.

The blue line is the USO, the black line is the dollar index.



Now look at the USO in comparison to the financial sector...
(green is the financials)



Why is there such a strong link between the financials and oil? And would this indicate that the current market downturn has been caused more by the rising price of oil rather than subprime losses and CDO credit default swaps? And does the increasing price of oil indicate FURTHER losses among the financials and the DOW?

[MrGimp]

No one has any opinion on this? Perhaps a shorter time frame would better illustrate the correlation...



Why is there such a strong link between oil and financials?

[james_gsx]

I'm not really sure why there is that inverse. My guess would be mostly psychological over the last few months. People moving funds from financials to oil because it seems strong compared to financials which appear weak.

As far as statistical proof and reasons, I have no idea.