Tag Archives: sector dispersion

Sep 21, 2020

Sectors and Electors

Markets expect elevated volatility surrounding the U.S. Presidential election, now just six weeks away. The VIX futures curve currently peaks in November, but as long ago as April a close observer could detect expectations of electoral volatility. Increased volatility may create an unusual opportunity for sector allocators. To understand why, we need to remember that…

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Dec 2, 2016

Plus ça change, plus c’est la même chose

This coming Sunday, December 4, 2016, a constitutional referendum will take place and the citizens of Italy will decide on a proposal by Prime Minister Matteo Renzi that, if passed, would mean major changes to Italy’s legislative system. The Prime Minister has stated his intent to resign if the “No” camp triumphs. The political stakes…

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Nov 2, 2016

Quiet Before the Storm

Quiet Before the Storm? Global markets seemingly remain unperturbed—despite homing in on Election Day in the U.S.  Although dispersion ticked up globally from September month-end levels, it is still sitting at below average levels as of October 31 in the U.S. Similarly, correlation is also well below average. Together these coordinates are pointing to particularly…

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Apr 13, 2015

Sector Dispersion and Active Management

Market volatility is a function of both dispersion and correlation, as shown in this schematic: Dispersion measures the degree to which the components of an index perform similarly.  If the components are tightly bunched, dispersion will be low and, other things equal, the index’s volatility will be low.  Correlation is a measure of timing; it measures…

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