What would happen if you took the Index and Sector Summary Heatmap I made last week, blew it up to the size of a 36MP image (6000-by-6000), and then added a plot of the change in correlation over time. Great question! Look below.
Since there’s a lot going on here, let’s summarize what’s going on:
- Make sure you zoom into the figure! You can use the scroll wheel on your mouse or two-finger slide on your touchpad to quickly zoom in and out.
- Each diagonal cell shows the return of each asset over the past week (6 periods, 5 returns). As an asset increases, the line is colored green, and as an asset decreases, the line is colored red.
- The lower left hand corner of each diagonal cell shows the total return of the asset over the past week. There’s also a label down there, in case you’re zoomed in and can’t see the labels on the edge.
- The off-diagonal cells show the correlation (5-period return) between two assets. The color of the cell indicates the degree of correlation – more correlated assets are more green, and less correlated assets are more red. In case you’re zoomed in, there’s a label in the lower left hand corner that tells you which two assets you’re looking at.
- The off-diagonal cells also show the time series of 5-day return correlation over the past 4 weeks.