I think in today’s world it is getting harder and harder to find assets that are not correlated and stay uncorrelated.
During the 2007 meltdown, many investors learned that asset correlation is a living thing that can change, and uncorrelated assets can become correlated exactly when you don’t want it to happen (during a market crash).
It tells me as an investor not to have too much faith in the correlation that I observed during good economic times.
100%. Assets are now becoming more and more correlated, and diversification has become less effective. Just look at how 60/40 allocation performed last year when stock/bond correlation became positive
There are people who advocate developing uncorrelated STRATEGIES. It's a laudable endeavour, but not trivial at all.
Great article.
I think in today’s world it is getting harder and harder to find assets that are not correlated and stay uncorrelated.
During the 2007 meltdown, many investors learned that asset correlation is a living thing that can change, and uncorrelated assets can become correlated exactly when you don’t want it to happen (during a market crash).
It tells me as an investor not to have too much faith in the correlation that I observed during good economic times.
100%. Assets are now becoming more and more correlated, and diversification has become less effective. Just look at how 60/40 allocation performed last year when stock/bond correlation became positive
There are people who advocate developing uncorrelated STRATEGIES. It's a laudable endeavour, but not trivial at all.