Correlation Gauging for Stock Picking in 2012!





Market Information for this Week.....

Correlation Gauging for Stock Picking in 2012!
- February 20, 2012

Correlation gauging has fallen significantly this year, indicating it might be time once again to utilize a stock-picking prowess. In 2011 stock correlation peaked at around 90%, and spent most of the year above 80%. In 2012, it has fallen dramatically, and currently stands around 43%.

Stock Pullback – Time to Buy Portfolio Insurance!

A stock pullback provides buying opportunities and this is evident so-far in 2012. The Dow Jones Industrial Average (DJIA) and Nasdaq Composite (COMP) have both rallied their way to new multi-year highs although several other equity benchmarks -- including the S&P 500 Index (SPX) -- finished the week just shy of their 2011 highs. Portfolio insurance became cheaper this past week, as SPX historical volatility was flat, while the CBOE Market Volatility Index (VIX - 17.78) decreased 14%, closing the gap between implied and historical volatility on the SPX.

The Week Ahead in the Stock Market - February 20, 2012

In the week ahead stocks may find it difficult to maintain the 9-month highs as everyone is waiting for a stock pullback! With results in already from 404 S&P 500 companies, investor focus may already have shifted away from earnings – the outlook for Europe and the U.S. economy -- data on existing- and new-home sales – will take the limelight.




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