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-horizon fundamental risk model. The first set of tables is designed to capture U.S. industries, 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. The fixed-income data consist of government yields, investment-grade and subinvestment-grade spreads for the U.S. and eurozone. Correlations between the fixed-income yields, spreads and equity indexes are provided in the multiasset-class section. Data are as of Dec. 31, 2012.
| Predicted volatility by industry |
| U.S. market |
| 10 most volatile |
|---|
| Automobiles | 23.5 | -1.4 | | Airlines | 23.2 | -3 | | Building products | 22.3 | -2 | | Auto components | 21.2 | -2.7 | | Household durables | 21 | -2.8 | | Metals & mining | 20.6 | -2.5 | | Textiles, app. & lux. goods | 20.6 | -2.1 | | Construction materials | 20.6 | -4.1 | | Energy equipment & svcs. | 20.5 | -2.5 | | Office electronics | 20.1 | -2.6 |
| | | 10 least volatile |
|---|
| Food products | 14.8 | -2.1 | | Tobacco | 15.5 | -0.5 | | Food & staples retailing | 15.6 | -1.9 | | Household products | 15.6 | -1.8 | | Pharmaceuticals | 15.6 | -1.1 | | Healthcare prov. & svcs. | 15.7 | -1.8 | | Diversifed telecom. svcs. | 15.7 | -1.4 | | Thrifts & mortgage finance | 15.8 | -2.5 | | Independent power prod. | 15.8 | -1 | | Insurance | 15.9 | -2.5 |
|
| |
| Index volatility |
 |
| |
| Predicted volatility by currency* |
| Developed markets | | 10 most volatile |
|---|
| New Zealand dollar | 9.6 | -1.2 | | Swedish krona | 9.4 | -1.6 | | Australian dollar | 8.7 | -2 | | Norwegian krone | 8.7 | -1.8 | | Swiss franc | 7.9 | -1.7 | | Euro | 7.5 | -1.6 | | Danish krone | 7.4 | -1.6 | | Japanese yen | 7.4 | 0.3 | | Canadian dollar | 6 | -1.2 | | British pound | 6 | -0.9 |
| | | Emerging markets | | 10 most volatile |
|---|
| Hungarian forint | 13.9 | -3.1 | | South African rand | 13.2 | -2.1 | | Namibian dollar | 13.2 | -2.1 | | Polish zloty | 12.2 | -3.3 | | Czech koruna | 11.1 | -2.2 | | Serbian dinar | 10.6 | -1.1 | | Zambian kwacha | 10.4 | 1 | | Russian ruble | 10 | -1.8 | | Indian rupee | 9.9 | 0.3 | | Mexican peso | 9.7 | -1.8 |
|
| |
| Predicted volatility by country** |
| Developed markets |
| 5 most volatile |
|---|
| Greece | 32 | -1.1 | | Spain | 19.6 | -6.2 | | Italy | 18.7 | -5.2 | | Finland | 17.4 | -5.6 | | Ireland | 17 | -3.5 |
| | | 5 least volatile |
|---|
| Canada | 11.6 | -3.4 | | South Korea | 11.8 | -3.8 | | New Zealand | 12.2 | -3.4 | | Australia | 12.7 | -3.8 | | Singapore | 13.2 | -3.7 |
|
| Emerging markets |
| 10 most volatile |
|---|
| Egypt | 27.3 | 0.3 | | China | 16.2 | -1.5 | | Taiwan | 15.6 | -1.2 | | Peru | 15.2 | -3.8 | | Indonesia | 14.9 | -3.8 |
| | | 10 least volatile |
|---|
| South Africa | 9.6 | -2.3 | | Pakistan | 11.2 | -2.7 | | Malaysia | 11.3 | -2.6 | | Czech Republic | 11.4 | -2.3 | | Chile | 11.7 | -3 |
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| |
| Country-country correlations** |
| Developed markets |
| Highest correlations |
|---|
| France | Netherlands | 0.72 | | France | Belgium | 0.72 | | Spain | Italy | 0.72 | | France | Germany | 0.71 | | Germany | Netherlands | 0.7 |
| | | Lowest correlations |
|---|
| U.S. | South Korea | -0.48 | | U.S. | Singapore | -0.38 | | U.S. | Hong Kong | -0.37 | | South Korea | France | -0.34 | | Japan | Germany | -0.33 |
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| Emerging markets |
| Highest correlations |
|---|
| Czech Republic | Hungary | 0.34 | | Pakistan | Morocco | 0.33 | | Czech Republic | Poland | 0.29 | | Mexico | Chile | 0.24 | | Malaysia | Morocco | 0.23 |
| | | Lowest correlations |
|---|
| India | Brazil | -0.27 | | China | Taiwan | -0.22 | | China | Turkey | -0.21 | | India | Czech Republic | -0.21 | | China | Pakistan | -0.21 |
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| |
| Currency-currency correlations** |
| Select developed markets-emerging markets correlations |
| Currencies |
|---|
| Japanese yen | Brazilian real | -0.06 | | Pounds sterling | Brazilian real | 0.42 | | Canadian dollar | Brazilian real | 0.5 | | Australian dollar | Brazilian real | 0.56 | | Swiss franc | Brazilian real | 0.27 | | Euro | Brazilian real | 0.39 | | Russian ruble | Brazilian real | 0.46 | | Indian rupee | Brazilian real | 0.42 | | | | Japanese yen | Indian rupee | -0.2 | | Pounds sterling | Indian rupee | 0.36 | | Canadian dollar | Indian rupee | 0.42 | | Australian dollar | Indian rupee | 0.42 | | Swiss franc | Indian rupee | 0.04 | | Euro | Indian rupee | 0.35 | | Russian ruble | Indian rupee | 0.43 | | Brazilian real | Indian rupee | 0.42 | | | | Japanese yen | Russian ruble | -0.17 | | Pounds sterling | Russian ruble | 0.59 | | Canadian dollar | Russian ruble | 0.6 | | Australian dollar | Russian ruble | 0.65 | | Swiss franc | Russian ruble | 0.41 | | Euro | Russian ruble | 0.64 | | Indian rupee | Russian ruble | 0.43 | | Brazilian real | Russian ruble | 0.46 |
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| Asset-asset correlations |
| Median 60-day correlation |
 |
| | Multiasset-class data |
| Risk |
|
|---|
| US T-Note 10Y (yield) | 1.75% | 13 | 0.72% | -0.14% | | US IG (spread) | 197 bps | -21 | 10.36% | -3.80% | | US HY (spread) | 438 bps | -57 | 13.98% | -2.67% | | EUR Gov’t 10Y (yield) | 1.30% | -15 | 0.79% | -0.22% | | EUR IG (spread) | 261 bps | -65 | 16.00% | 3.05% | | EUR HY (spread) | 496 bps | -92 | 16.53% | -6.60% |
|
| Asset correlations |
|
|---|
| US T-Note 10Y (yield) | 1.00 | -0.40 | -0.52 | 0.71 | -0.42 | -0.35 | 0.57 | 0.52 | 0.45 | | US IG (spread) | | 1.00 | 0.64 | -0.34 | 0.41 | 0.34 | -0.35 | -0.30 | -0.38 | | US HY (spread) | | | 1.00 | -0.37 | 0.40 | 0.38 | -0.36 | -0.31 | -0.37 | | EUR Gov’t 10Y (yield) | | | | 1.00 | -0.48 | -0.36 | 0.44 | 0.43 | 0.48 | | EUR IG (spread) | | | | | 1.00 | 0.50 | -0.36 | -0.32 | -0.33 | | EUR HY (spread) | | | | | | 1.00 | -0.25 | -0.21 | -0.25 |
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| *Numeraire: U.S. dollar. **In excess of the global market; emerging markets section includes only countries in the FTSE Emerging Markets index. |
| Source: Axioma |
