Unsustainably low stock correlation is dangerous
The thesis argued that historically low stock-to-stock correlation is over-diversifying portfolios, depressing index volatility unsustainably, and creating vulnerability to a sharp correction.
THE ALPHA EXCHANGE CHANGED ITS VIEW
BULLISH FOR 3 WEEKS, THEN THE TURNKeep reading this one
You've read the thesis and who argued it. A free account opens the argument, what validates it, the risks the show raised, and the moment in the episode where it was said — 3 ideas in full a day, no card.
The Callback
Integrated risk: correlation, single-stock vol, and cheap insurance
35 weeks between these two statements.
The host argued that historically low implied and realized correlation in the S&P 500 is a market vulnerability that is likely to rise, increasing index volatility.
The thesis argued that historically low stock-to-stock correlation is over-diversifying portfolios, depressing index volatility unsustainably, and creating vulnerability to a sharp correction.