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- Between 2000 and 2007, the risk-adjusted returns on a trade that involved borrowing at low interest rates in developed markets and investing in emerging markets had a 0.18 correlation with the S&P 500 risk-adjusted return. During the 30 days ended July 8, the correlation was 0.77, according to Renaissance Macro. High-yield bond returns and the S&P 500 returns had a 0.06 correlation before the financial crisis, compared with the recent 30-day correlation of 0.67. Returns on a basket of commodities was at negative 0.01 correlation the benchmark stock index. Now it’s at 0.58.
ThurberMingus · 2837 days ago · link ·
If pre and post crisis correlations are needed, compare 2000-2007 to 2008-201X. 30 day periods are just noise compared to 7 year periods.
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ThurberMingus · 2837 days ago · link ·
Yeah... more data could give some perspective on whether that is interesting or just fluff & noise. What I want to see is the second example (high yield bond vs S&P500) for as many 7 year periods as there is data, 1900-1907, 1901-1908, ... 2008-2015, 2009-2016. What is the range of correlations? What is the shape of the distribution? Is 2000-2007 particularly interesting or an outlier? On the whole I think the article just fluff. Like the comment on the Fed watching global markets after the UK referendum. Of course they will say something like that.