MarketWatch: Here’s a sign stock-market volatility is going to remain under wraps in the months ahead

MarketWatch’s latest article featuring DataTrek Nick Colas’ work on sector correlations:

“Stock-market volatility has subsided after a February spike, and there’s a reason to think it will remain under wraps in the near term.

That’s because the exceptionally low volatility that prevailed in 2017 could be explained by the equally low correlation between S&P 500 sectors. A downward shift in correlation — a measure of the degree to which assets move in relation to each other — points to less volatility in the coming months, according to Nick Colas, co-founder of DataTrek Research.

The relationship between U.S. sector correlation and stock market volatility is very clear, Colas said.

“When correlation is falling, it drives volatility down. But a spike in volatility, the kind we saw in February, drives correlation between sectors up,” Colas said in a phone interview.”….

Read the full article here on MarketWatch!