In April 2004 JP Morgan introduced the notion of base correlations, a novel approach to quoting correlations for synthetic CDO tranches that facilitates a simple relative valuation of off-market tranches. Using a simple intensity-based credit risk model, we generate “true” tranche spreads and examine the behavior of the base correlations and the merits of the relative valuation approach. We reach three conclusions. First, even if the true default correlation increases, base correlations for some tranches may actually decrease. Second, base correlations can vary, depending only on the position of prior attachment points. Third, the relative spread errors are small in some segments but can be very large, ±10% for mezzanine tranches, the errors changing sign from tranche to tranche.