Has the art of stock picking been irreversibly harmed by the financial crisis? Not if you ask analysts at JPMorgan who believe the equity correlation bubble is about to burst, which would great news for lots of money managers.

The onset of the crisis and the subsequent recession has created a herd mentality that led more managers to sell the market and then buy it en masse. Index products, of course, facilitated this and actually reinforced it.

Research from Barclays shows between October 2008 and February 2009, correlation hit 80 percent, MarketBeat notes. When stocks rallied last year, the figure fell to 40 percent, only to rise to more than 80 percent during the European debt crisis. In mid-August, correlation had drifted down to 74 percent and hit 66 percent in September. As the dominance of macro drivers abates (hopefully), it could go even lower.

"Correlations between stocks are currently at the highest level in recent history ... We believe that correlation levels are in a bubble-like regime and are bound to decline," stated JPMorgan.

That should allow equity funds to start drawing distinctions among stocks again. But it will take a while. Between 2000 and 2007, correlation of about 25 percent was the norm.

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