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Correlation | July 19, 2017

Posted on July 19, 2017

Near-term and long-term correlations are converging, but are still below historical averages. As a result, we think there are many potential options for positive performance through the selection of risk-diversifying assets and individual names. In short, we still see this as a stock picker’s market. The correlation figure measures how each asset return moves in […]

Correlation | July 12, 2017

Posted on July 12, 2017

Our Observations: Correlations are very low in nearly every asset class. This is a little bit surprising given the volatility of the bond market, which should be signaling other parts of the market, but that doesn’t appear to be the case. However, we think it would be smart to keep an eye out for correlations […]

Correlation | July 6, 2017

Posted on July 6, 2017

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 […]

Correlation | June 21, 2017

Posted on June 21, 2017

Our Observations: U.S. debt has had below-average correlations for much of the year; we believe this provides one of the few diversifying safe havens in the global markets.  Meanwhile, developed foreign bond and EM bonds are near their long-run averages and therefore not as compelling as U.S. bonds in terms of diversification. The correlation figure […]

Correlation | May 10, 2017

Posted on May 10, 2017

Our Observations: Nearly every asset class had short-term correlations much closer to long-term correlations. We think this will assist in portfolio construction as the diversification benefits of cross asset portfolios should improve. The best example is the return of negative correlation for bonds, which is historically a strong indication that rate policy may not be the primary […]

Correlation | May 3, 2017

Posted on May 3, 2017

Our Observations: Short-term correlations in bonds have gone negative, indicating that bonds are once again acting as the standard diversifiers to the basket. We think this is a good sign and may indicate a breakdown in policy-driven markets. The correlation figure measures how each asset return moves in relationship to the broader basket of asset […]

Correlation | April 26, 2017

Posted on April 26, 2017

Our Observations: Short-term correlations have been declining in nearly every segment of the market. This move is breaking up the somewhat lopsided market that had been driven by interest rates and inflation expectations and provides a potential opportunity for diversification. One of the more notable changes has been the decrease in correlations for U.S. bonds […]

Correlation | April 19, 2017

Posted on April 19, 2017

Our Observations: The price of the S&P 500 peaked on March 1st and has fallen nearly 3% while the U.S. Dollar has fallen 2% relative other major currencies. We believe this has created some unique inter-market changes, including a sharp rise in the short-term correlations (22-days) of gold and silver. Precious metals tend to be […]