Correlation | July 6, 2017

Category: Quant Insight

Our Observations: Short-term correlations are still below long-term averages in many asset classes. We think this may provide fertile ground for alpha among single securities and could be a good environment for building a well-diversified portfolio. We see the this as likely driven by the pause in policy expectations, which could be reignited if Congress manages to piece together a healthcare deal.

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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