I was just comparing two daily returns series and noted that the correlation between them is a lot higher if they are cumulated (about .95 for cumulative returns, vs .15 for non-cumulative). I feel that there should be a simple intuitive explanation for why that is. Is it because these returns behave more similarly over longer time horizons? As opposed to day-to-day?
More generally, is it customary to look at the correlation of cumulative, or non-cumulative returns? What time horizons are used? For example, I have heard this rule of thumb that if the correlation is above 0.7, it means that the returns are highly correlated. But I feel that to be meaningful statements like that should also specify the type of the return and the time horizon.
How do you judge correlation between return series? What time horizons and return types do you use? What is highly correlated, or uncorrelated for you?