Correlation

Category: Quant Insight

Correlations among U.S. and emerging market stocks continue to rise, but energy commodities and foreign developed stocks buck that trend. Note the increasing correlations for sovereign debt, which we believe is eating away at the diversification benefits of bonds.

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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