A big concern in the hedge fund universe last year was a high degree of correlation that seemed to question the very premise of hedge funds. The correlation among stocks was troubling enough. The correlation among a lot of disparate asset classes was even more cause for worry.

But MarketWatch suggests there's now reason for optimism, as signs show correlation is starting to break down. Gold prices and stock prices have been diverging as of late. Various stock strategies are also showing less lockstep movement.

All of this is welcome news in the asset management industry; there are still many hedge funds that are convinced they can pick and choose asset classes better than the rest. The breakdown of correlation indicates a return to normal--individual securities and asset classes being driven by fundamentals and specific technical data, not mass market hysteria.

The degree to which correlation negatively affected the hedge fund industry in 2010 may have been overplayed by some, an excuse for poor relative performance. Such funds may not have that excuse in 2011.

For more:
- here's the article

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