>we have seen bizarrely correlated asset price changes due to macro issues Actually, this is quite expected given event-risk in the market. For example, even i

>we have seen bizarrely correlated asset price changes due to macro issues Actually, this is quite expected given event-risk in the market. For example, even in a non-crisis situation, correlation increases in intra-day trading when market-moving news is due - e.g. payroll numbers are due or ISM numbers are released. Coming back to the present, headline-risk hasn't been as high as it has been since May, 2010 as we keep having one EU summit after another, one central bank announcement after another and each having a huge impact on how asset prices behave. So the correlation is not entirely bizarre - people have been making correlation trades as well - for example JP Morgan's huge loss while betting on credit index tranches was a bet on implied vs. realized correlation (it didn't play out as expected, of course). I'd be interested to know how people are playing this out in the equity space - via variance swaps?