Rekenthaler Report

Stock Returns May Not Be What They Seem

John Rekenthaler

Two Beats One
For the 19-year time period of 1997-2015, gold almost exactly kept pace with the Dow Jones. Ten thousand dollars invested in the Standard & Poor’s Spot Gold Index in January 1997 had become $28,716 by year-end 2015. The comparable figure for the Dow Jones Industrial Average was $28,905. Of course, while the two indexes ended near the same place, their paths were quite different; ‘twas merely by accident that they finished together. This is what their paths looked like.
  - source: Dow Jones, S&P, Morningstar

Per the basics of investment math, if two assets have the same rate of return and are imperfectly correlated (or better yet, perfectly negatively correlated), then it makes sense to hold both in a portfolio, rather than one or the other.