COVID anomaly in the correlation analysis of S&P 500 market states

TL;DR

This paper identifies a new, anomalous market state in the S&P 500 from 2006 to 2023, using correlation analysis, which may indicate a shift in market dynamics or a new market regime.

Contribution

The study uncovers a previously unseen market state in the S&P 500, highlighting a significant anomaly in correlation patterns over an extended period.

Findings

Discovery of a new market state not previously observed.

Strong correlation anomalies indicating a potential regime shift.

Implications for understanding market dynamics and future analysis.

Abstract

Analyzing market states of the S&P 500 components on a time horizon January 3, 2006 to August 10, 2023, we found the appearance of a new market state not previously seen and we shall discuss its possible implications as an isolated state or as a beginning of a new general market condition. We study this in terms of the Pearson correlation matrix and relative correlation with respect to the S&P 500 index. In both cases the anomaly shows strongly.