(click to enlarge)
This graph plots the number of firms in each combination of legacy credit rating (columns) and default probability (rows). The upper left hand square for example shows how many AAA-rated firms have default probabilities between 0.00% and 0.02% (9). The squares are color code with red indicating the highest number of firms. The graph shows clearly the low degree of correlation default ratings and default risk. This low correlation is even more dramatic during the peak of the credit crisis in 2008-2009.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.