I haven't had the time and motivation to participate in the Financials tearsheet challenge, but I am curious why the focus is on the financials sector? So, I used the handy site https://www.portfoliovisualizer.com/ to plot the rolling 20-day correlation of daily returns between SPY & XLF (note that the plot says "Rolling 20-month Correlation" but I think this is a typo, and should say "Rolling 20-day Correlation"). Kinda interesting. There's been something whacky going on at a high level. What is the root cause?
Cool site! Difference in capital structure and sensitivity to interest rate changes I would think are two major factors.
@ Joakim -
Difference in capital structure and sensitivity to interest rate changes I would think are two major factors.
It looks to me that something changed in mid-2016, so how would the factors you mention explain the sudden onset of variability in the correlation between SPY and XLF? Seems odd that there would be a relatively consistent correlation for a long time (even through the Great Recession period) and then things go haywire.
Similarly, I wonder what caused the lack of correlation in the 2000 time frame?
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