Dispersion traders pull back as US stock market correlation hits near-record lows

Investors are pulling back from dispersion, a complex breed of derivatives bet that has minted huge profits this year, as traders grow skittish amid a historic slump in US stock market correlation.

A dramatic reshuffling in US equity markets this year has delivered a major windfall for dispersion traders, who use derivatives to profit from stocks heading in different directions.

Equity correlation – a gauge of how much share prices move in tandem – has plunged to near record lows in recent weeks as stock pickers continue to place wagers