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In One Chart: Risk of market contagion has reached a 6-year high, Deutsche Bank analyst says

Tightly wound correlations between assets have prevailed in recent trade on Wall Street, and they are at their highest level since December 2012, according to Deutsche Bank’s chief strategist, Binky Chadha.

Chadha says closely bound correlations, meaning that a move in one directly influences a move in another, reflects market extremes as investors flock into certain assets.

The Deutsche Bank analyst says cross-asset correlations are at 90%. A reading of 100% represents perfect correlation, where assets tend to move in the same direction at the same time.

He notes that crude-oil prices CLJ8, -1.33% are up nearly 60% over the past seven months, the S&P 500 index SPX, -2.12% has climbed by about 32% since around November 2016, while the Dow Jones Industrial Average DJIA, -2.54% is up more than 43%.

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