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Marrying correlation and asset allocation
Correlation in global equities has been on the rise for the past decade. The credit crisis, structural shifts in global financial flows and the rise of exchange-traded funds has meant that asset classes seem to be moving together. Rebecca Hampson reports
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Rising correlation over the past decade, together with assumptions based on historical data being wiped out by the credit crisis, has left asset allocators and portfolio managers in a difficult place.
“We are now in a macro period, where the relationship between assets and correlation means we are susceptible to macro movements,” says Dan Draper, managing director and global head of exchange-traded funds (ETFs) at Credit Suisse in London. “It is a different monetary policy we are seeing emerge
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