The chart below compares the performance of long-term treasuries (TLO) to emerging market bonds (EMB) over the past year.
Tag Archive for Correlation
Contributors- Economic and Financial, Must Read, Taken Down
Treasuries increasingly drive stock market performance – Sober Look
by Sober Look • • 0 Comments
This is a syndicated repost courtesy of Sober Look. To view original, click here. Reposted with permission. Follow the money. Find the profits!Liquidity is money. Regardless of where in the world that money originates, eventually it flows to and through Wall Street. So if you want to know the direction of the next big moves…
Contributors- Economic and Financial, Must Read, Taken Down
Correlation between equities and treasuries turns positive- Sober Look
by Sober Look • • 0 Comments
The last time short term correlation between treasuries and US equities turned positive was at the beginning of Fed’s QE2 in 2010. At the time both equities and treasuries rallied in anticipation of the new stimulus. Now we are back to positive correla…
Contributors- Economic and Financial, Must Read, Taken Down
The blurring of the risk-on/risk-off effect – Sober Look
by Sober Look • • 0 Comments
As a follow-up to the discussion on “risk-on/risk-off” (see post), there is further evidence that the market dynamics that have been in place over the past four years have recently been altered. The negative correlation between the US dollar and the US…
Contributors- Economic and Financial, Must Read, Taken Down
A shift away from RORO? – Sober Look
by Walter Kurtz • • 0 Comments
Something strange happened in the market today. The dollar (DXY) and the US equity indices traded lower – together.
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| Source: MarketWatch |
Historically one would indeed expect a positive correlation between these markets. After all, a healthier US economy – at least in principle – should benefit both the US dollar and the stock market. And the reverse also holds true. But these are not normal times. Since the financial crisis, the correlation has been consistently negative, making today’s move unusual.
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+correlation+to+SP500.PNG) |
| Correlation between the dollar (DXY) and the S&P500 (daily returns, rolling 90 day correlation) |
That’s because markets switched into the “RORO” (risk on/risk off) mode after the Lehman collapse. And the dollar has clearly been viewed as a “safety asset” – an asset that rallies in a risk-off scenario (see discussion from 2009).
So does today’s bout of positive correlation point to signs of normalization? Only time will tell. But this relationship is important to watch, as it will signal any major regime changes in the market and a potential shift away from RORO.
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Contributors- Economic and Financial, Must Read, Taken Down
Not all "risk assets" are created equal – Sober Look
by Walter Kurtz • • 0 Comments
We all talk about the old RO-RO – the so called “risk-on/risk off” behavior of markets. It hasn’t always been this way. “Risk assets” became particularly correlated after the financial crisis (see 2009 discussion). Many newer market participants simply…
Contributors- Economic and Financial, Must Read, Taken Down
Sharp declines in equity correlations should improve alpha generation – Sober Look
by Walter Kurtz • • 0 Comments
The implied correlation futures contract has touched a new low recently. With the Eurozone seemingly stable for now, correlations among US stocks have declined. That means share prices are now driven to a somewhat larger extent by company fundamentals than by macro events in Europe. This is good news for stock pickers who have struggled to outperform the market in recent years (see discussion). Alpha generation by strong portfolio managers should improve.
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| Source: CBOE |
For those interested in learning more about how the implied correlation index is computed please see this paper from the CBOE.
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Charts, Economics, Email Bulletins Archive, Lee's Free Thinking, Must Read
Initial Unemployment Claims Belie Last Week’s Hysteria on Jobs
by Lee Adler • • 0 Comments
This report is an excerpt of the currently updated permanent Employment Charts page which includes the monthly jobs and average earnings data, as well as the Labor Departments Job Openings and Labor Turnover Survey (JOLTS) and real time data on Federal Withholding taxes. The charts on that page are updated as soon as new data…
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When Is a “Hedge” Not a Hedge | Ritholtz
by Newswires • • 0 Comments
The claim is being made that JP Morgan’s $2 billion trading loss was in a trade that was a “a hedge.” It doesn’t take much review to easily disprove that position. Follow the money. Find the profits!Liquidity is money. Regardless of where in the world that money originates, eventually it flows to and through Wall…
Charts, Economics, Email Bulletins Archive, Lee's Free Thinking, Must Read
Lots of Conomic Data Releases, All Of Them Misleading
by Lee Adler • • 0 Comments
There’s been lots of conomic data over the past couple of days. I covered the NAHB builder survey yesterday. Regardless of the fact that the housing market is at pathetic levels historically, the builder data showed the rebound off the lows to be on track. Today, the government released data on housing starts to add…
