Dow and S&P 500 haven’t been this disconnected since 2003

A pair of typically closely correlated equity benchmarks haven’t been seeing eye to eye, lately.

The Dow Jones Industrial Average DJIA, and the S&P 500 index SPX, the most popular stock-market gauges, usually move in lockstep, displaying what is known as a positive correlation. But in recent trade, the equity indicators have seen the lowest level of correlation since 2003, tracking a 20-day rolling average of the benchmarks over the past 15 years.

A reading of 0.00 describes no relationship between two assets, while 1.00 means assets are perfectly aligned, moving in the same direction at the same time.

A 15-year average of the Dow and the S&P 500 shows that the relationship is nearly perfect at 0.9557. However, the rolling 20-day period shows a stark erosion of that relationship, with a reading of 0.4655. marking the lowest level of correlation between the S&P and the Dow industrials since Aug. 4, 2003.

“The disconnect is probably due to the tech stocks because some of the biggest companies are tech stocks but not many of them are in the Dow Jones,” said Randy Frederick, managing director of trading and derivatives at Schwab Center for Financial Research.

Source: Bloomberg

Junior Trader Stefan Panteleev

Read more:

• And for all the bounty hunters: Iran offers $80m for the head of Donald Trump
• US service member and 2 US Defense Dept contractors killed in Kenya attack
• Iranian Quds leader Qasem Soleimani has been killed – how are markets reacting
• A calm end of an otherwise loud 2019
• Old but Gold – Top 5 posts of Varchev Finance