– Since Q4 2016, correlations of S&P 500 stocks to the index have generally fallen, giving active managers more chances to differentiate themselves from the indexes they are trying to beat.
– More dispersion among individual stocks makes it easier to find winners, giving managers a bigger pond of potential outperforming stocks to fish in.
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Source:
LPL Research, Ned Davis Research 07/25/18
Important Disclosures:
Correlation ranges between -1 and +1. Perfect positive correlation (a correlation co-efficient of +1) implies that as one security moves, either up or down, the other security will move in lockstep, in the same direction. Alternatively, perfect negative correlation means that if one security moves in either direction the security that is perfectly negatively correlated will move in the opposite direction. If the correlation is
0, the movements of the securities are said to have no correlation; they are
completely random.
Active management involves risk as it attempts to outperform a benchmark index by predicting market activity, and assumes considerable risk should managers incorrectly anticipate changing conditions.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.
Tracking #1-754944 (Exp. 07/19)