  Stock correlations is crucial to asset pricing, investor decision-making, and
financial risk regulations. However, microscopic explanation based on
agent-based modeling is still lacking. We here propose a model derived from
minority game for modeling stock correlations, in which an agent's expected
return for one stock is influenced by the historical return of the other stock.
Each agent makes a decision based on his expected return with reference to
information dissemination and the historical return of the stock. We find that
the returns of the stocks are positively (negatively) correlated when agents'
expected returns for one stock are positively (negatively) correlated with the
historical return of the other. We provide both numerical simulations and
analytical studies and give explanations to stock correlations for cases with
agents having either homogeneous or heterogeneous expected returns. The result
still holds when other factors such as holding decisions and external events
are included which broadens the practicability of the model.
