Tail risk redux

Tobin's q is a measure of the aggregate overvaluation or undervaluation in the stock market. It examines the ratio between the value of the stock market and physical cost to replace those firms. The latest data from the Federal Reserve show that recent overvaluation in the stock market has matched peaks in 1906, 1936 and 1968.

Only gold was negatively correlated with the market during each of the five biggest drops in the Russell 3000 since 1987. Yields of U.S. 10-year Treasuries, which should move with equity returns to hedge stock risk, were positively correlated in all but one drawdown (1990).

Listed below are returns for select tail funds and volatility exchange-traded products between May and August of this year, as equity markets slumped.