U.S. Stock Correlations Are Down. Waaaay Down

It appears that we may be in a stock pickers market.  According to the WSJ correlation between stocks in the S&P 500 are down.  What this means that instead of the pure play risk on risk off trade investors can actually gain some advantages picking specific stocks.


Traders get crushed when asset classes move together because there are no assets they can turn to in order to juice their returns.  In my mind a healthy market is one that trades on fundamentals vs. an all in or all out approach.  However as long as there are European issues to worry about the low correlation may not last long


From the WSJ

• With money pouring into ETFs and actively managed stock funds seeing week after week after week of outflows, this is a trend that investors don’t seem to have noticed. One area to watch is performance of long-short hedge fund managers, many of whom have seen returns crushed by stocks moving in lock-stop.