It is natural to intend of the 24-hour interval session inward the S&P 500 Index (SPY) equally an extension of overnight trading both inward stock index futures as well as inward the stock markets overseas. That is non the case, however. Since the commencement of the bull marketplace inward March, 2009, the correlation betwixt overnight activity inward SPY (percentage alter from yesterday's some today's open) as well as 24-hour interval session activity (percentage alter from today's opened upwardly to today's close) has exclusively been .08. In a pure statistical sense, these are assort markets.
If nosotros employ indexes out of the cost activity of the 24-hour interval (pink line) as well as nighttime (blue line) sessions, nosotros tin flame run across this lack of correlation. Of the roughly l SPY points gained since the March, 2009 low, well-nigh 32 bring occurred during the 24-hour interval session as well as eighteen overnight. Note, however, that the 24-hour interval session cost changes are much to a greater extent than volatile than the overnight series: during periods of potent ascent as well as cost correction, we've seen most of the changes occurring during the 24-hour interval session. Indeed, the touchstone divergence of cost changes overnight is well-nigh 40% less than that occurring during the day.
What this tells us is that deciding whether to concord or non concord stocks overnight based upon what has happened during the 24-hour interval mightiness last hazardous to traders' wealth. These are unlike markets, amongst unlike distributions of returns. While trading the 24-hour interval session exclusively tin flame eliminate the ambiguity of the overnight trade, it besides truncates a meaning component of the bull marketplace returns.
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