Options Jive - May 21, 2025 - Market Storms and Portfolio Correlations

The tastylive network

In this episode of Options Jive, hosts Tom Sosnoff and Tony Batista discuss market conditions and present our research on how asset correlations increase dramatically during market downturns. Our research demonstrates that when market volatility (measured by VIX) spikes, diverse assets like Apple, Southwest Airlines, emerging markets, energy producers, and Costco all show significantly stronger correlations with the S&P 500, increasing by 20-50%. We conclude that traditional diversification strategies become less effective during high volatility periods, suggesting that reducing overall market exposure may be more beneficial than relying on diversification alone.