Intraday FX-Risk Divergence Is Back, S&P 8 Points Rich
Now that DE Shaw and Citadel are pretty much without a stat arb desk, daily divergences are likely to become the norm. To wit: after we highlighted the complete breakdown in correlations earlier, this afternoon's sell off in the AUDJPY has left the S&P/ES roughly 7 points rich. For those who are still stupid enough to actually trade, a pair trade convergence may make some sense here: buy AUDJPY, sell ES. And use lots of leverage: after all, becoming TBTF is every schoolboy's dream. If going down, make sure you drag the entire system with you.