The Ice Age of Correlation Abates

Your boy is speaking on a panel tonight called “Correlation Nation – When all markets and asset classes are in correlation, it’s hard to find a winner” as part of the Dow Jones Expert Series (details below).

The irony here is that correlation has (finally) dropped like the voice of a child star slamming into the brick wall of  puberty.  The drop-off in the degree to which stocks had been moving in unity has a lot to do with the easing of volatility since the year began – volatility and stock correlation are essentially a package deal.

Here’s Brendan Conway in the Wall Street Journal last week:

By one measure, stocks’ tendency toward so-called market correlation has fallen from a high of about 80% in the middle of last year to about 30% now, according to figures compiled by J.P. Morgan Chase & Co. A reading of 100% correlation would mean that stocks are trading in perfect unison.

The swift decline is “the largest drop in realized correlation in the recent history of [the] U.S. stock market,” J.P. Morgan options strategist, Marko Kolanovic, wrote this past week.

This is welcome news to stock pickers who’ve essentially seen one of the most absurd periods of lockstep synchronization in market history.  In October of 2011 84% of S&P 500 stocks were moving in the same direction as the index itself.  Now things aren’t quite so defeating – winners can win and losers can go f themselves down in price.

The Ice Age of correlation has at long last abated, the frozen intra-market relationships have melted away.

That said, a period of sustained volatility can quickly bring back the misery so even the most micro of players need to keep at least a half an eye on the headlines.

Below some info on my song and dance this evening:


If you’re going, say hello!

 

 

 

What's been said:

Discussions found on the web
  1. old facebook design commented on Sep 25

    … [Trackback]

    […] Read More here to that Topic: thereformedbroker.com/2012/01/26/the-ice-age-of-correlation-abates/ […]

  2. Harold Jahn Alberta commented on Nov 27

    … [Trackback]

    […] Read More Info here on that Topic: thereformedbroker.com/2012/01/26/the-ice-age-of-correlation-abates/ […]

  3. td bank easyweb commented on Dec 04

    … [Trackback]

    […] Read More here to that Topic: thereformedbroker.com/2012/01/26/the-ice-age-of-correlation-abates/ […]

  4. Auto Glass Anytime commented on Dec 12

    … [Trackback]

    […] Info on that Topic: thereformedbroker.com/2012/01/26/the-ice-age-of-correlation-abates/ […]

  5. tag heuer replica watches paypal commented on Dec 17

    … [Trackback]

    […] Find More on that Topic: thereformedbroker.com/2012/01/26/the-ice-age-of-correlation-abates/ […]

  6. DevSecOps Services commented on Dec 21

    … [Trackback]

    […] Find More Info here to that Topic: thereformedbroker.com/2012/01/26/the-ice-age-of-correlation-abates/ […]

  7. rbc online banking sign in canada commented on Jan 03

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2012/01/26/the-ice-age-of-correlation-abates/ […]

  8. paito warna commented on Jan 16

    … [Trackback]

    […] There you can find 47365 more Information to that Topic: thereformedbroker.com/2012/01/26/the-ice-age-of-correlation-abates/ […]

  9. bmo mastercard sign in commented on Jan 26

    … [Trackback]

    […] Here you can find 71078 additional Info on that Topic: thereformedbroker.com/2012/01/26/the-ice-age-of-correlation-abates/ […]