<p>Recently, DeepSeek, tariffs and earnings news have caused large moves in some stocks but not others, leaving fluctuations at the equity index level relatively tame. Will this volatility moderating run of low correlation continue?  In this short podcast, I explore the recent history of extraordinary diversification in the US equity market along with the implications that may result. Is the market vulnerable to recency bias and assuming that ultra-low correlation is here to stay?  Further, how should we think about the presence of derivatives trades designed to profit from the anti-connectedness in stocks?  Is there risk of a plumbing problem in correlation? Lastly, I argue that playing defense through a rigorous search for diversifying assets as well as owning some market-based insurance is important. Bitcoin, gold and broad market put spreads are worth owning. I hope you enjoy the discussion and your feedback is welcome. Be well.</p>

Recently, DeepSeek, tariffs and earnings news have caused large moves in some stocks but not others, leaving fluctuations at the equity index level relatively tame. Will this volatility moderating run of low correlation continue? In this short podcast, I explore the recent history of extraordinary diversification in the US equity market along with the implications that may result. Is the market vulnerable to recency bias and assuming that ultra-low correlation is here to stay? Further, how should we think about the presence of derivatives trades designed to profit from the anti-connectedness in stocks? Is there risk of a plumbing problem in correlation? Lastly, I argue that playing defense through a rigorous search for diversifying assets as well as owning some market-based insurance is important. Bitcoin, gold and broad market put spreads are worth owning. I hope you enjoy the discussion and your feedback is welcome. Be well.

<p>Recently, DeepSeek, tariffs and earnings news have caused large moves in some stocks but not others, leaving fluctuations at the equity index level relatively tame. Will this volatility moderating run of low correlation continue?&nbsp; In this short podcast, I explore the recent history of extraordinary diversification in the US equity market along with the implications that may result. Is the market vulnerable to recency bias and assuming that ultra-low correlation is here to stay?&nbsp; Further, how should we think about the presence of derivatives trades designed to profit from the anti-connectedness in stocks?&nbsp; Is there risk of a plumbing problem in correlation? Lastly, I argue that playing defense through a rigorous search for diversifying assets as well as owning some market-based insurance is important. Bitcoin, gold and broad market put spreads are worth owning. I hope you enjoy the discussion and your feedback is welcome. Be well.</p>

Is There a Plumbing Problem in Equity Correlation?

The Alpha Exchange is a podcast series launched by Dean Curnutt to explore topics in financial markets, risk management and capital allocation in the alternatives industry. Our in depth discussions with highly established industry professionals seek to uncover the nuanced and complex interactions between economic, monetary, financial, regulatory and geopolitical sources of risk. We aim to learn from the perspective our guests can bring with respect to the history of financial and business cycles, promoting a better understanding among listeners as to how prior periods provide important context to present day dynamics. The “price of risk” is an important topic. Here we engage experts in their assessment of risk premium levels in the context of uncertainty. Is the level of compensation attractive? Because Central Banks have played so important a role in markets post crisis, our discussions sometimes aim to better understand the evolution of monetary policy and the degree to which the real and financial economy will be impacted. An especially important area of focus is on derivative products and how they interact with risk taking and carry dynamics. Our conversations seek to enlighten listeners, for example, as to the factors that promoted the February melt-down of the VIX complex. We do NOT ask our guests for their political opinions. We seek a better understanding of the market impact of regulatory change, election outcomes and events of geopolitical consequence. Our discussions cover markets from a macro perspective with an assessment of risk and opportunity across asset classes. Within equity markets, we may explore the relative attractiveness of sectors but will NOT discuss single stocks.

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Is There a Plumbing Problem in Equity Correlation?

Is There a Plumbing Problem in Equity Correlation?

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