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Are Stocks Showing Correlation Breakdown?


Stocks making "theme" moves as they adjust to some sort of new world. And all in different directions.

So you can certainly feel the volatility uptick in the year. The best sign is stocks making these "theme" moves as they adjust to some sort of new world. And all in different directions. Goldman (GS) is now going to jail. At least chart jail. Oil service stocks will never drill (baby) drill again. Gold is a safe haven.

In other words, correlation has broken down. Except it hasn't, because if it did, index volatility would tank, and it's actually done quite well the last couple weeks.

But what about names that don't fit any of these themes? Like Research in Motion (RIMM) here. I cherry-picked this one because I wanted one where the earnings move had no factor in recent 10-Day HV.

You can see the pop in HV about a month ago, but that's just the one-day move going in and out of the calculation. Otherwise, it's just deader than dead. It hovered in mid 20s volatility before the number, and has basically hovered there since.

How about options? Well, 30-day normalized HV sits in the low to mid-30s, really about right compared to the stock.

This picture here is like meatloaf -- kind of a comfort food. Good to know there's still dry land that the recent choppy moves have left unscathed.

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No positions in stocks mentioned.
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