Yuriy A. Stepanov, Rudolf Schäfer, Thomas Guhr, Joachim Peinke, Philip Rinn

We combine geometric data analysis and stochastic modeling to identify financial correlation dominating variables and extract its explicit stochastic model. We analyze dynamically distinct market states and quantify system behavior within the states [1,2]. We apply these methods to correlation dynamics of European equities and iBoxx® bond indices. We recover our earlier results for equities, which are therefore universal. We use the multi-asset market states and study real economy dynamics [3]. As an application of equity universalities, we use correlation extreme values for trading equity index futures.

[1] YS, Rinn P, Guhr T, Peinke J and and Schäfer R, J. Stat. Mech. 2015 (2015) P08011

[2] Rinn P, YS, Peinke J, Guhr T and Schäfer R, EPL, 110 (2015) 68003

[3] YS, Erik Wellner and Tarek Abou-Zeid, “Quant.Capital Management”, c15-Dezember-2015, http://www.quantcapital.de/en/news/