Bonds are negatively correlated to equities?

Tim Farrelly | farrelly's Investment Strategy | 12 March 2013

 

Risk on, risk off. Equities rise and bonds fall, or bonds fall and equities rise – that is, bonds are negatively correlated to equities – and that makes bonds a great diversifier despite their low yields.

For the past few years, this idea has been absolutely correct. However, to hear some commentators, you would think that this negative correlation is a fundamental law of nature. It is not. The idea that bonds and equities are always negatively corr...

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