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Chinese stocks have been a big disappointment for investors in recent years, but at least they offer one upside: In a world where most major indexes tend to zig and zag together, China's benchmark index stands out with a low correlation.

That has helped during the turbulence of the past month. As The Economist pointed out in its analysis of the Shanghai Stock Exchange Composite index, U.S., European and Japanese indexes fell between 5 per cent and 9 per cent during the downturn that began in September, but the Shanghai index remained unchanged, giving it the look of a haven.

Of course, Chinese stocks are by no means replacements for more typical havens, such as U.S. Treasuries, but their low correlation with other stocks nonetheless offers a selling feature to investors looking for more diversification.

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But should they buy for that reason? Probably not.

The Economist's analysis was thorough. It looked at the monthly correlations for seven major indexes, including the Shanghai stock exchange composite index, the FTSE 100, the S&P 500 and the Nikkei 225, and converted changes into U.S.-dollar terms. It then grouped the results into four eras: 2000 to present, 2000 to the end of 2004, 2000 to the end of 2009, and 2010 to today. In each case, Chinese stocks exhibited a weak correlation with U.S., Japanese and European stocks.

Why? The Economist points out that China's relatively strict capital controls – essentially barring outside investors from significant share ownership – limit the flows of money into the market, making it less susceptible of rallying when other markets are on the rise.

As well, Chinese stocks have been struggling while most other markets have rallied. The index has fallen more than 60 per cent from its high in 2007. And since mid-2009, when the S&P 500 has essentially tripled, the Shanghai index has fallen about 30 per cent. Put in these terms, correlation isn't perhaps such a good thing.

It might not last, either. China is set to relax foreign ownership quotas, which could put its benchmark index more in line with others. "The more access that foreign investors get to China, the more its stock market movements will resemble those of other countries," The Economist concluded.

If the lack of correlation hasn't exactly made anyone rich, perhaps more correlation will make Chinese stocks a better bet.

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