If I am looking at putting on a play between two assets, should I look at the correlation of their prices or of their returns. I read something which states that if the two assets have a cointegrating relationship, you should look at the correlation of the levels, rather than returns. I was looking at the relationship of a stock vs a commodity (which is a large part of the stocks value - say aluminimum and an aluminium smelter), and the correlation of the log returns was around 67%, and the correlation of the levels was around 96%. Is this a great hedge or only an avergae hedge.