Category: Quant Insight

Correlations have declined somewhat but are still near historically high levels. However, short-term bonds in the U.S. and Europe are once again exhibiting negative correlations to stocks, which could signal a slow down in the rate sensitive macro conditions that have been driving the market for the past month.

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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