Index Dashboard: Dispersion, Volatility & Correlation

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Elevated trading volumes in U.S. equities, coupled with December’s usual decline in liquidity, produced a five-year high in both monthly index volatility and average constituent correlations for the S&P 500®. We report above-average volatilities and correlations in a majority of our indices for the final month of 2018. With earnings reports largely completed and broader themes dominating sentiment, dispersion declined in December in every one of our reported equity benchmarks. The largest decline in dispersion came in the mega-cap Dow Jones Industrial Average, where dispersion more than halved from November. Compared to 2017, we observed higher volatility, higher correlations and higher dispersion this year, with monthly correlations and volatility in the S&P 500 averaging more than double last year’s levels.