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Correlation for non investment grade credits
Hi,I have lately read an article about some hedge fund establishing a factoring fund.http://www.cbsnews.com/news/another-inv ... plague/The article crticizes the specific busines model and pricing of the proposed venture.It includes the following paragraph:"The memorandum also noted that in addition to the 10 percent expected return, investors would benefit from owning a non-correlating asset. If the credits aren't investment grade, then the correlation of the returns will increase to high levels."My question is whether it is true that the correlation indeed increases for non investment grade and why.Thanks,G