Stocks Decouple From Price Correlation, History Suggests a Correction

“Asset price correlations across a wide spectrum of industries and asset classes are meaningfully lower than the last few months. ConvergEx’s Nick Colas note that this is something completely unexpected: we’ve approached a “Normal” capital market over the last 30 days.

S&P 500 sector correlations are below 80% relative to the index, foreign stocks are 77-87% correlated to U.S. stocks, and even domestic high yield corporate bonds are 56% dancing to their own tune.

However, before we run off celebrating the return to a stock-picker’s market, it is worth noting one statistical point worth your time: when industry sector correlations have dropped below 80% from 2010 to the present…”

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