Comovement represents the absolute number of stocks in the S&P 500 which move on the same direction on any day (either up or down).
If half the stocks move up and half move down, comovement would equal zero. If 100% of the stocks move up, comovement would slightly exceed 500 (there are currently 505 stocks in the S&P 500).
Holding volatility relatively constant the rise of index funds has led to a marked increase in the comovement of stocks since the 1990s.
This along with volatility selling and illiquidity creates a market structure that has serious implications for investing.
