Us Equity Index Correlation

By Craig Bewick
NOV 11 2020

US Equity Index prices were mixed again today but this time the Nasdaq saw strong gains while the Dow Jones Industrials and Russell 2000 were lower and the S&P 500 was up slightly.  It seems the market is still weighing the positive developments about a vaccine announced by Pfizer earlier this week with an increasing number of Coronavirus cases.  So far this week, there has been a disparity in performance of those stocks that tend to outperform in more restrictive “lockdown” situations with those that would outperform in more “open economy” situations. 

We can observe this in other CME Group markets such as WTI Crude Oil, Gold and US Treasury futures as well.  Today, Gold and Silver futures prices both fell while US Treasury and WTI Crude Oil prices rose slightly, though WTI Crude Oil was up by much more earlier in the trading session.  Despite today’s slight decline, implied yields in US Treasury futures products at the longer end of the curve remain near the highest levels we’ve seen since March. 

The divergence in performance of the major US Equity Indexes this week presents an opportunity to showcase another QuikStrike tool; the Cross Correlation matrix.  Users can use this tool to examine both the correlation of price returns of different CME Group products as well as the correlation of the implied volatility levels.  In this case, we’ll look at the correlation of the returns of the 4 major US Equity Index products at CME Group.  The lower image shows the correlation over the last 12 months which, as you can see, represents four very highly and positively correlated indexes.  However, when we shrink the time period down to the last week as we did in the upper image, the correlation is generally much lower and even turns negative when comparing the Nasdaq to the Dow Jones Industrials and Russell 2000.  These images help to underscore the emphasis the market seems to be placing on “open” vs “not open” stocks. 


Craig Bewick has spent 25 years in futures and options markets, starting at CBOT and CME working in risk management, regulatory, technology, product management and client development. 

After 8.5 years with WH Trading LLC, Craig returned to CME Group as the Director, Client Development and Sales, working to educate and promote futures trading. Craig currently writes for InFocus Options Corner.

Connect with Craig at

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