The last few weeks my portfolio has moved in sync with the larger markets. I thought it was coincidence until I saw this article in Wall Street Journal. The average correlation since 1980 has been 44%.
Earlier this year, when stocks were on the mend and investors were less anxious, the correlation between the S&P 500 and its stocks fell below 50%, suggesting investors were looking for individual stocks to own rather than just buying large indexes. By mid-June, the correlation had jumped back above 70%, last week it touched 83% one day.
Correlation typically goes up during volatile periods when investors dump stocks wholesales rather than pick out stocks that once were viewed as refuges *such as those that pay dividends.
Source: http://bit.ly/ddgZc4
