23 May 2012
S&P 500 Volatility, Euro Correlation Both Increase As Euro Crisis Worsens
As the European debt crisis once again makes headlines, with no indications of a quick solution on the horizon, the US equity market has reacted by suffering from a bout of increased volatility. Should there be any doubt as to why, correlation of the S&P 500 to the Euro has been increasing as well. Below, we present a chart showing rolling 90 day realized volatility of the S&500 index (red line) along with rolling 90-day S&P 500 correlation to the Euro currency (blue line).
All calculations are as of 5/22/2012, executed on daily data since 4/1/2012.