Stock-Bond Correlation (60/40 Killer)Inspired by David Dredge
Why It Matters:
When correlation > 0:
❌ Bonds don't provide cushion when stocks fall
❌ Both portfolio engines fail simultaneously
❌ Rebalancing makes losses worse
✅ Long volatility strategies outperform
✅ Gold often benefits
Trading Signals:
When Correlation Crosses Above 0:
Action:
Reduce 60/40 allocation
Add long volatility positions
Consider gold/commodities
Increase cash buffer
When Correlation > 0.3:
Action:
Emergency mode
Maximum long vol exposure
Defensive positioning
Review all correlations
When Correlation Returns Negative:
Action:
Can resume 60/40
Scale back volatility hedges
Return to normal risk
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