Investors expect stocks to move increasingly out of sync as shown by the Cboe 3-Month Implied Correlation Index (.COR3M), which measures the 3-month expected average correlation across the top 50 value-weighted S&P 500 stocks.
The last time 3-month implied correlation got this low was in early 2018, just before the February 2018 urge in market volatility dubbed 'Volmageddon.'
Much of today's low stock market correlation has to do with the gulf in performance between a handful of mega caps driving the benchmark index higher and the rest of the market.
"You have this view in the market that this is a stock picker's market because correlation is low," EAB Investment Group's Holzer said.
"Because correlations are so low, index options have gotten incredibly cheap," said Daniel Kirsch, head of options at Piper Sandler said.
Persons:
Dow, Arnim Holzer, Group's Holzer, Jack Ablin, Ablin, Kris Sidial, Sidial, Daniel Kirsch, Piper Sandler, Saqib Iqbal Ahmed, Megan Davies, Nick Zieminski
Organizations:
YORK, Dow Jones, EAB Investment, UBS, U.S . Federal, Cresset, Ambrus, Thomson