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Market Strategy

Struggling to Break Free: Rising Correlations Part II

By David Nowakowski and Natalia Gurushina
Aug 25, 2010 3:15:00 PM | Last Updated

Whereas we previously focused on behavior of different asset classes in relation to the S&P 500 to assess so-called “market risk”, we now turn to a broader evaluation of market behavior including elevated volatilities and correlations. Our objective is to enhance return and mitigate risk by exploring:

  • The correlation structure of asset classes with one another
  • The correlation structure within each individual asset class
  • The volatility and liquidity measures’ interactions with asset class performance
  • Normalized returns of high and low correlation assets’ volatility[...]

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