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VIDEO: Implied Correlations and the Death of RO-RO

November 7, 2017

In this video we look at the CBOE Implied Correlation Index and the general evolution of correlations for the S&P500 and what it means for traders and investors.  Specifically, the video walks you through a couple of slides of a recent edition of the Weekly Macro Themes report.  In the video we talk through how the Implied Correlation Index can be used as a market timing indicator, as well as gleaning insights on the broader prevailing market regime.  We also take a look at the implied correlation index in relation to historical realized average pair-wise correlations across the sectors of the S&P500 and discover an interesting development.  Realized correlations have dropped to extreme low levels last seen around the peak of the dot com bubble - an important point which we talk through in the video.  We also note how the implied correlation index has likewise fallen to levels last seen around the 2007 market top.  From a market timing stand point the implied correlation index is 'implying' a risk of a short-term market top.


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