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Steep U.S. Stock Correlations Show Virus’s Impact on Markets

U.S. stocks continue to move in tandem at extreme levels.

The S&P 500 Index’s three-month realized correlation has steadied around the 0.8 level, its highest in about eight years, even though other gauges of market stress such as the Cboe Volatility Index have retreated toward normal levels. The divergence suggests investors continue to focus on just one main driver -- the global coronavirus pandemic -- making it harder for active fund managers to beat their benchmarks.