Monthly Market Metrics and Trends

Market Theme: When Correlation Doesn’t Tell the Whole Story of Hedge Effectiveness

• The 11 industry sectors that comprise the S&P 500 have shown a high degree of return dispersion of late. October marked a sharp downturn for the Information Technology sector, which declined 6.8% on the month. Only one other sector (Telecommunication Services) showed a monthly decline; all others rose, with several sectors showing robust gains (Energy: +14.0%, Consumer Staples: +11.6% and Utilities: +10.2%).
• We examine to what extent correlations, which measure the degree to which two assets’ returns move together, can provide information about which sectors are best positioned to hedge against negative returns, focusing on the tech-heavy Information Technology sector

Market Metrics

• S&P 500 (Price Index): October close 7,580.07, -0.9% M/M, +10.7% YTD, +10.8% Y/Y
• S&P 500 Sector Total Return Performance:
  • Best = Energy +14.0% M/M / Energy +59.9% YTD / Energy +64.2% Y/Y
  • Worst = Communications -15.1% M/M / Communications -11.3% YTD / Communications -6.6% Y/Y
• Volatility Index (VIX): Monthly average 16.9%; +1.1 pp M/M, -1.2 pp Y/Y
• Equity Average Daily Volume (ADV): Monthly average 17.3 billion shares; +1.9% M/M, -17.6% Y/Y
• Options ADV: Monthly average 68.2 million contracts; +5.8% M/M, -3.6% Y/Y

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