The (In)Stability Of The Relationship Between Stocks, Bonds And Managed Futures

Abstract

This study re-examines the traditional belief that futures contracts have very low and, in some cases, negative correlations with stocks and bonds.  Specifically, it looks at the stability of the correlations between five indices of futures market performance and two stock and bond indices over various holding periods.  Results show that large positive correlations occur over short holding periods, but over the long run, the relationship is fairly stable, in particular for certain indices.