Rising Correlations & Falling Stocks 🌤️ The Morning Print
Good morning!
Stock correlations are rising, a behavior normally seen during periods of market stress.
Let's take a look.
The CBOE 1-Month Implied Correlation Index (COR1M) measures how closely stocks are moving together.
It helps determine whether the market is acting as a single entity or as a collection of individual stocks.
When correlation spikes, it typically signals a bearish environment where stocks are declining in unison.
These spikes have also consistently coincided with market bottoms.
The index is now back near levels where it has previously rolled over.
For a durable rally to take hold, correlation needs to come down.
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