Correlation | August 2, 2017

Category: Quant Insight

The correlation among stocks rose over the past week as the reflation theme that dominated early this year appeared to reassert itself. This creates a macro theme of rising interest rates and strength in inflation sensitive sectors and regions. We think it is important to keep an eye on rates for further indications of this trend.

The correlation figure measures how each asset return moves in relationship to the broader basket of asset returns listed on the X axis. When correlations are high or rising, it may indicate that economic movements and sentiment are driving the majority of returns, which could potentially make security selection challenging.

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