Sign of a Crisis Market: Asset Correlations Remain High

Here we see the bottom patterns for oil (USO; top chart), euro futures (middle chart), and S&P 500 futures (bottom chart). These moved in unison to the downside, and now are pretty much lockstep to the upside.

One characteristic of crisis markets is that correlations among asset classes become quite high. One sign that we are emerging from crisis would be a decoupling of markets, as markets more efficiently differentiate winners and losers, within equities and across asset classes.

Comments

[suhaas:]

Interesting. But can you throw light on when this uptrend will end, and which asset classes will continue up?

2008 Oct 30 04:22 PM

[RiskAverseA...:]

What's to say "crisis markets" cannot continue for many more months, even as upward correlations remain intact?

2008 Oct 30 06:22 PM

[investor88:]

An interesting way to look at the factors in a crisis market. It is still a crisis market.

2008 Oct 30 06:54 PM

[Vianney:]

That is pathetic. 3 assets (drawn from many) have shown high correlation over a few days in which risk appetitie moved sharply. It's hardly surprising, it is an analytical empty-box.

2008 Oct 30 08:21 PM