Remember: in finance as in other aspects of life, one risk may be hiding behind another! In recent years, with markets oscillating between phases of complacency and spikes in risk aversion, the focus has often been on the volatility of asset prices and less on their correlation.

True, while there have been many volatility shocks, diversification between “risky” assets and “safe havens” has worked well and has accustomed many multi-asset investors to seeing losses by the former offset by gains in the latter.

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BNPP IP: Volatility and correlation: it takes two to tango