Correlation regime
Whether the average correlation of a set of instruments is inside its own usual range.
Correlations rise when markets are under strain and fall when stocks trade on their own news. Comparing today's average with its own history shows which state the set is in, and for how long it has been there.
Formula
z = (Now − Historical mean) ÷ Historical standard deviation
How to read it
Outside ±2 is unusual. Rolling values overlap, so a run of them is one episode, not many independent signals.
In Kereon
Charts · Correlation. The average of every pair's rolling correlation, on the periods all the instruments share (those with three years of prices). Its usual range at each date is the mean ± 2 standard deviations of its own EARLIER values; a run outside it is an episode. That z is descriptive. The tested line compares each pair's latest window with everything before it (Fisher's z, 5% FDR).
Also called: correlation regime, usual range.