Any paper or text I read always says to take log return(or just a return) of 2 assets you want to correlate. I am correlating CL and HO and my manager wants me to use Price Level correlations(in other words just straight correl() on the prices).
Anyone understand this rationale?
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Straight price will not work. I usually find that correlating price changes (day to day) gives you a much more accurate correl. You can also try lags on products from your base CL data as you're essentially measuring cracks volatility when you are running CL and products correls.
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