Correlation | July 27, 2017

Category: Quant Insight

Correlations among asset classes increased over the short term, which may indicate a renewed strength in macro issues likely stemming from broad based signaling of increased rates. While rates didn’t move very much over the past week, we think the overall range of trading will signal to markets what sort of macro events are driving the market. We think it is helpful to keep an eye on key benchmark rates such as the 10-year Treasury.

The correlation figure measures how each asset return moves in relationship to the broader basket of asset returns listed on the X axis. When correlation ns 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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