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You're correct in that many financial instruments with traditionally inverse correlation started moving differently. However, this is mainly from the natural correlation between two instruments that may develop over time. For example, assuming the cell phone market only had 2 players, apple and samsung. And let's assume investors think it's a winner takes all market. So, historically, if apple shares went up, it means investors think they will dominate, which means investors think samsung will lose. This may lead samsung stock to decline when apple stocks increase and vice-versa. Now imagine a recession. Investors don't care about that relationship anymore, because they just want to pull their money out of the market. Now everyone is dumping both apple and sumsung, so now, the correlation has changed. I assume this is what you are talking about for the instruments you were mentioning. But, we use options, which are artificially created, so when we buy put options, they will always be 100% inversely correlated to the underlying REIT/ETF. Therefore, if the REIT/ETF goes down during a recession, our options will increase in price. Hope this clarifies things! |