Correlation

Category: Quant Insight

Correlation among emerging market stocks and bonds has increased in recent months. This is consistent with the resurgence of a reflation theme. Should rates re-enter the range established at the beginning of the year, the increased correlations would help confirm that this theme is back in place.

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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