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Asset correlations

Diversification of risk is key for optimising portfolios and asset correlations vary with investment term. Unlike other models that predicate the correlation between asset classes, the EV Asset Model analyses the dependency of asset classes rather than the correlation between them and, in doing so, allows correlation to evolve naturally through the model, thus also capturing its term structure.

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Asset correlations over years

The chart shows the correlations between the expected growth rates of various asset classes. Cash and bonds are negatively correlated over short horizons but positively in the long term.

 
 
 
 
 

Change over quarter

Change in asset correlations

The chart shows the change in expected asset correlations over the past quarter. Most of the change in correlations is positive and driven by the increase in interest rates.

 
 
 
 
 

Change over year

Change in asset correlations

The chart shows the change in expected asset correlations over the past year.

Most of the change in correlations is positive and driven principally by the increase in interest rates seen over the most recent quarter.