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Portfolio123 » List all forums » Forum: General Comments » Thread: Liquidity normalizing? |
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probtrader
Advanced Member ITALY Joined: Oct 11, 2004 Posts: 109 Status: Offline |
Over the last few days I noticed my positions moving more in sync with the indexes, meaning long positions going up when the market is green and short positions gaining more during market down days. Is this the same feeling of the other investors here, or you're still experience frustrating portfolio down days when the market is up? Of course, this is only true until the next hyper-leveraged hedge fund dumps its ill-positions on the market  ---------------------------------------- [Edit 1 times, last edit by probtrader at Jan 28, 2008 12:47:56 PM] |
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olikea
Advanced Member
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I haven't noticed that in general, but I have noticed that the correlation between stocks and the index is closely, ahem, correlated to their liquidity. E.g. stocks with less than $200k daily turn have very little correlation, while stocks with greater than $1bn daily turn are very highly correlated. Also, if stocks are included in an index, such as the S&P500 index, they tend to be highly correlated to the S&P 500: the movements in trading the S&P500 itself drives stocks more than the other way round: Futures are traded heavily, and arbitrageurs trade the stocks and keep them in line. |
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