From HedgeWorld.com A new study bears out Wall Street's conventional wisdom that when markets go down, the only thing that goes up is correlation. Quantitative models with different ways of screening stocks have fallen into lock-step, according to a report from Citigroup. Manolis Liodakis, Christian Davies and Adam Strudwick of Citigroup Research described a dramatic rise in correlation among what were previously thought of as independent factors such as company valuation, quality and price momentum. Quant strategies use various factors to pick trades. Correlation between pairs of factors for the past three weeks was up to 40% as of Aug. 8, in contrast to long-term average correlation of less than 10%. As a result, quant strategies fell afoul of market movements in unison....There is some assurance from the Citi study. Similar events occurred in the past, though rarely. Out of 3,264 daily observations since 1995, there were only 69 instances when all quant strategies had trouble and correlations increased. The good news is that in those cases the strategies recovered shortly and performed relatively well.