Financial Turbulence measures how statistically unusual today's cross-asset return vector is, in one number. We take the twenty markets' daily returns and compute the Mahalanobis distance d_t = (r_t − μ)ᵗ Σ⁻¹ (r_t − μ), where the mean and covariance are estimated on the trailing 500 trading days ending the day before — today never informs its own baseline. The covariance uses Ledoit-Wolf shrinkage for stability. High turbulence means assets are moving unusually far, in unusual combinations — correlations breaking, hedges failing — which is when risk models built on calm data understate losses. Introduced by Kritzman & Li (2010), "Skulls, Financial Turbulence, and Risk Management."
The Absorption Ratio measures how tightly unified markets are. Each day we take the covariance matrix of the twenty return series over the trailing 250 days and ask: how much of the total variance is absorbed by the top four principal components (Kritzman's ~1/5-of-assets rule) — a handful of hidden common factors? A high ratio means markets are moving as one bloc, so a shock anywhere transmits everywhere; a low ratio means risk is spread across independent drivers. The standardized 15-day shift (ΔAR) is the early-warning version: a rise of more than +1σ says markets are unifying quickly. In both the original research and our own sample, forward returns after unification ran worse than after de-coupling — treat it as a fragility flag, not a timing signal. From Kritzman, Li, Page & Rigobon (2011), "Principal Components as a Measure of Systemic Risk."
The universe grew from the original eleven markets to the full twenty-market board in July 2026 (factor count scaled per the 1/5 rule). All markets are first aligned to a common trading calendar: dates where every market traded, with single-day holiday gaps carried forward (one day max). Markets with under three years of history would be excluded (none currently are). Both series are precomputed in the daily pipeline; regime-state models play no role here — this page is pure price statistics. Fragility measures say nothing about direction: turbulent markets fall and rally hard. Educational, not investment advice — see the Disclaimer.