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Market Measures

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Probabilities of Being Correlated

Market Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

We know that individual stocks are more prone to being highly correlated to the market in times of a selloff, but the question we are going to answer today is how often do stocks vs. other assets experience high market correlation?

  • Since 2006, how often have different assets been correlated to the market i.e. market correlation > 0.60?
    • Rolling 3-month correlation rate
  • How often have these assets had a high market correlation during the current selloff (since Feb 15 2020)?

We find that ETFs that area not equity based experience market correlation less often than individual stocks in periods of market selloffs and normal market conditions.

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