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Benedicte Gravrand, Opalesque Geneva:

It is often said that managed futures funds are market neutral: they are investments that are not correlated to the rest of the market. But according to recent research by Newedge Prime Brokerage, managed futures strategies and the S&P500 can and do demonstrate a high level of correlation "over certain periods."

"In Superstars versus teamwork, we showed the distribution of estimated pair-wise correlations is broad and symmetrical when the true correlation is low (i.e. large sampling error). Given a correlation of -0.16 between the Newedge CTA Index and S&P 500 since January 2000, we should expect to see periods of relatively high positive correlation. Even so, intervals of increased correlation still have real implications for a portfolio of diversified trading strategies," wrote Ryan Duncan in an investor research snapshot last week titled The experience of uncorrelated assets.

When analysing the S&P500 and the Newedge CTA Index, Newedge's research team found that when correlation is high, the CTA index' performance seems to be, nevertheless, independent of the S&P's. The other discovery is that when these instances take place, the S&P is generally in positive territory.

The Newedge CTA Index has a compounded return of almost 110% from January 2000 through December 2010.

The researchers, who have observed greater correlations in the last four years and who note that even though the average ......................

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