Part II of Theo Casey's consideration of his Nokia dividend play.
Five months ago a French quant pitched me his
bank’s most exotic product. A short correlation
play whose name was an antonym of discord. In essence, it was
long liquidity. "Stock pickers will come to the fore in the
second year of equity market growth. "Differentiation," it was
said, "will be rewarded." At it’s peak, the
structure had over €
1bn of hedgie money.
The French quant’s French bank was not alone in
propagating the "short correlation" meme. Everyone was at it.
In its 2011 investment idea book, JP Morgan predicted the range
for realised correlation would lie between 15-20% and proposed
clients short it. From April to September correlation, as
measured by the Citigroup realised correlation index, rose 400%
from 22 to 103.
This article is available to subscribers and registered users
Please log in to continue reading.
Not yet registered? Take a free trial.
If you have already taken a free trial you
have ongoing access to the analysis section of FOW.com including this story.
Log in using your details below to read.
Already have an account? |