Strategies

Divergence and Convergence

Parent Strategy

Divergence and Convergence strategies look at whether markets are moving in the same direction (convergence) or in different directions (divergence)

  • Markets are deemed to be "healthy" when various components move along with each other (convergence)
  • Markets are deemed to be "unhealthy" when various components are moving in different directions (divergence)
    • can be viewed as a cautionary sign - trouble may be brewing - expect higher volatility and lower returns



Basic Definitions

Divergence = when two or more things move apart from each other

Convergence = when two or more things move closer to one another