European Quant Strategy - Correlation Chronicles Correlations Signal Quality–Risk Dynamic is Shifting

Research evidence excerpt

European Quant Strategy - Correlation Chronicles Correlations Signal Quality–Risk Dynamic is Shifting

J P M O R G A N Global Markets Strategy

19 June 2026

European Quant Strategy -

Correlation Chronicles

Correlations Signal Quality–Risk Dynamic is Shifting

• Quality correlations have rolled over, but returns have not yet followed European Equity Quantitative

Quality || Momentum fell to a sample-history low in Q4 '25 but has since Strategy

accelerated back toward positive, while Quality || High Risk, having risen to William Summer AC

the top of its historical range, has begun moderating. These pairs reconverging (44-20) 7742-6079

has historically marked the start of mean-reversion, near the Dotcom bubble william.summer@jpmorgan.com

and ahead of the GFC, each followed by Quality outperformance in Khuram Chaudhry

challenging markets. The returns have not turned: Quality long-short YoY (44-20) 7134-6297

remains deep in negative territory, near the bottom of the historical range and khuram.chaudhry@jpmorgan.com

the kind of drawdown extreme that preceded recoveries in 2000 and 2008. The Ayub Hanif, PhD

(44-20) 7742-5620

correlation inflection without a return inflection is the crux: if correlations are ayub.hanif@jpmorgan.com

leading as they have historically, the return recovery should follow. We would J.P. Morgan Securities plc

watch for a QMI phase shift as confirmation, but the asymmetry favors

building Quality exposure into the reversal. (Figure 1Quality|Momentum&Risk)

• High Risk leadership is stalling on correlations, though returns have not Figure 1: Quality || Momentum & Risk

1.00 yet broken. High Risk has been the best-performing factor in Europe year to 0.80

date after a strong 2025. Risk || Momentum has climbed from its post- 0.60