INTERACTIVE

Riskwatch for Q1 2018

RiskWatch provides recent data on volatility and correlation, the two components of risk, for U.S. and global equity and fixed-income markets. The equity data are derived from Axioma's medium-term fundamental risk models. One set of tables is designed to capture U.S. market sectors plus countries and currencies with the highest and lowest levels of volatility and how that component of risk has changed since the end of the prior quarter. The highest and lowest correlated countries within developed and emerging markets are also highlighted. Another table illustrates how currency volatility can be a major driver of risk in multicountry benchmarks and can often change substantially from one quarter to the next. The fixed-income data, detailed in the multiasset-class section, consist of U.S. and eurozone government yields, investment-grade and subinvestment-grade spreads as well as correlations among those asset classes and selected currencies. Note that the following charts are now using Axioma's new WW4 (worldwide) model: predicted volatility by currency, predicted volatility by country and country-country correlations. Data are as of March 30, 2018. Change compares to the previous quarter.
U.S. market volatility*
U.S. indexesCurrentChange
Russell 1000 12.3 6.1
Russell 2000 13.3 3.4
 
U.S. sectorsCurrentChange
Energy 21.81 4.12
Telecommunication services 18.37 1.68
Information technology 16.21 5.98
Financials 15.47 3.56
Materials 14.52 5.14
Industrials 14.34 4.78
Real estate 14.18 4.19
Health care 14.17 4.77
Utilities 13.50 3.11
Consumer discretionary 13.10 4.52
Consumer staples 11.82 3.77
Index volatility
Predicted volatility by currency**
Developed markets
10 most volatileCurrentChange
Norwegian krone 8.46 0.70
New Zealand dollar 8.4 -0.31
British pound 8.3 0.22
Japanese yen 7.88 0.21
Swedish krona 7.76 0.32
Australian dollar 7.59 0.29
Canadian dollar 7.04 0.28
South Korean won 6.86 0.46
Euro 6.83 0.40
Swiss franc 6.82 0.4
 
Emerging markets
10 most volatileCurrentChange
South African rand 14.14 -0.53
Mexican peso 10.38 -0.34
Turkish lira 10.04 -0.92
Brazilian real 10.00 -0.51
Colombian peso 9.82 1.06
Russian ruble 9.24 -0.66
Chilean peso 8.59 0.48
Polish zloty 8.56 0.42
Hungarian forint 8.37 0.43
Czech koruna 7.55 0.43
Predicted volatility by country**
Developed markets
5 most volatileCurrentChange
Japan 15.12 4.33
Italy 14.31 4.10
Portugal 13.82 3.67
Ireland 13.55 2.61
Spain 13.52 2.23
 
5 least volatileCurrentChange
Canada 9.70 3.66
Australia 10.32 3.17
New Zealand 10.98 4.04
Singapore 11.04 4.19
Norway 11.44 3.6
Emerging markets
5 most volatileCurrentChange
Qatar 22.39 2.93
Greece 20.95 0.39
Egypt 18.41 0.63
Chile 17.55 0.38
Turkey 17.32 0.36
 
5 least volatileCurrentChange
Czech Republic 10.69 2.74
Russian Federation 11.7 2.08
Malaysia 12.06 3.58
Ukraine 12.24 2.19
Mexico 12.27 3.06
Country-country correlations***
Developed markets
Highest correlationsCurrent
France Germany 0.81
France Netherlands 0.78
France Italy 0.77
Germany Netherlands 0.76
France Belgium 0.73
 
Lowest correlationsCurrent
Spain U.S. -0.52
U.S. France -0.47
U.S. Hong Kong -0.46
U.S. Belgium -0.46
U.S. Singapore -0.46
Emerging markets
Highest correlationsCurrent
Czech Republic Hungary 0.30
Mexico Colombia 0.28
Poland Hungary 0.26
Russian Federation Morocco 0.26
Russian Federation Pakistan 0.24
 
Lowest correlationsCurrent
India Taiwan -0.31
China India -0.31
India Mexico -0.27
Egypt India -0.24
China Thailand -0.24
FAANG stocks have become a larger portion of Russell 1000 risk
Capitalization weight of the FAANG stocks — Facebook Inc., Apple Inc., Amazon.com Inc., Netflix Inc. and Google (Alphabet Inc.) — in the Russell 1000 vs. how much they contribute to the overall volatility of the index.
Multiasset-class data
Risk
LevelChangeStandard deviationChange
U.S. 10-year T-note (yield) 2.74% 33 bps 51.67% -0.02%
U.S. inv.-grade (spread) 63 bps 9 bps 23.15% -0.02%
U.S. high-yield (spread) 285 bps 18 bps 50.79% -0.02%
European gov't 10-year (yield) 0.52% 4 bps 44.67% -0.04%
European inv.-grade (spread) 54 bps -3 bps 29.40% -0.07%
European high-yield (spread) 206 bps 11 bps 76.67% -0.08%
Euro** 1.23 2.42 6.83% 0.40%
British pound** 1.4 3.7 8.30% 0.22%
Japanese yen** 106.35 -5.59 7.88% 0.21%
Asset-class correlations
U.S.
10-year
T-note
U.S.
investment
grade
U.S.
high
yield
Euro
gov't
10-year
Euro
investment
grade
Euro
high
yield
Russell 1000Russell 2000FTSEEuroPoundYen
U.S. 10-year T-note (yield) 1.00 -0.29 -0.60 0.67 -0.25 -0.11 0.25 0.33 0.22 -0.11 -0.01 -0.43
U.S. inv.-grade (spread) -0.29 1.00 0.50 -0.14 0.18 0.20 -0.12 -0.12 -0.12 -0.06 -0.13 0.11
U.S. high-yield (spread) -0.60 0.50 1.00 -0.43 0.20 0.25 -0.40 -0.39 -0.50 0.01 -0.11 0.36
European gov't 10-year (yield) 0.67 -0.14 -0.43 1.00 -0.40 -0.20 0.11 0.19 0.12 0.09 0.07 -0.39
European inv.-grade (spread) -0.25 0.18 0.20 -0.40 1.00 0.44 -0.13 -0.14 -0.10 -0.12 0.01 0.19
European high-yield (spread) -0.11 0.20 0.25 -0.20 0.44 1.00 -0.09 -0.07 -0.14 -0.03 -0.07 0.16
Euro** -0.11 -0.06 0.01 0.09 -0.12 -0.03 0.04 0.04 0.18 1.00 0.50 0.41
British pound** -0.01 -0.13 -0.11 0.07 0.01 -0.07 0.01 0.03 0.15 0.50 1.00 0.19
Japanese yen** -0.43 0.11 0.36 -0.39 0.19 0.16 -0.14 -0.16 -0.07 0.41 0.19 1.00
U.S. and euro spread curves are defined as the spread over the swap curve (previously spread over the government curve). Emerging markets sections include only countries in the FTSE Emerging Markets index.
*US4 medium-horizon fundamental forecast.
**Numeraire: U.S. dollar.
***In excess of the global market.
Source: Axioma