Financial Sector: what the correlation breakdown reveals?
Cross-asset correlations are undergoing an impressive transformation. Our weekly scan detects 46 emerging correlations and 26 decaying ones, with movements reaching +1.34 and -1.32 points — levels historically seen only during market regime changes.
The most striking finding concerns the US financial sector (XLF), which is literally “decoupling” from the rest of the market. Its correlation with small caps collapsed from +0.56 to -0.76, with High Yield from +0.60 to -0.70, with Emerging Markets from +0.30 to -0.74. When an entire sector decorrelates simultaneously from such diverse assets, the market is communicating something important about future expectations.
The Complete Picture: Three Key Dynamics
This week’s correlation analysis reveals three interconnected dynamics that are redefining cross-asset relationships.
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