CHART OF THE DAY: S&P 500 Correlations Hit Record As Stocks Move En Masse

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Herd mentality has descended upon Wall Street, as S&P 500 stock correlation reaches its highest levels ever.

This unseats former records set in 1987, when portfolio insurance strategies caused stocks to tumble in tandem.

Analysts have learned to expect high correlation in bear markets, when investors rush to sell off equities. But Felix Salmon has noted that the rise of high-frequency trading and ETFs could mean that high correlation is just part of a larger trend.

Either way, this spike in correlation is far from reassuring for markets.

chart of the day, s&p 500 correlations, aug 2011

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