Correlations closed the week .23 6th percentile of the past 15 years.

We continue to cluster.

This suggest correlations should mean revert. This can happen via upside and downside – but we do not think that rotation between sectors is a probably bet – and think downside skew is more likely.

Point spread on VIX-VXV means holding long vol is very expensive – but we do not think it means short vol is the answer. There is large jump risk into the 35% realized territory.

Have a great week.