High Correlation Causing Headaches for Mutual Fund Managers

According to John Melloy, Fast Money Executive Producer, CNBC.com on The Christian Science Monitor, the correlation of moves in individual stocks and the S&P 500 index is at a record, making the job of long-only mutual fund managers to differentiate

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from the benchmark virtually impossible, according to a report from Goldman Sachs.

The correlation for the S&P 500 and its members is at 0.73, according to Goldman, meaning that the majority of stocks move in lockstep with the index on a daily basis. This is at least the highest in 20 years and therefore likely a record

“Record high S&P 500 and sector correlation poses a challenge for fundamental investors,” said David Kostin, chief U.S. investment strategist at Goldman Sachs, in the Friday note.

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