"As noted above, the Treasury indexes were the best equity diversifiers among various bond-fund types. But while there's the widespread perception that long-term Treasuries are the most attractive diversifiers, the recent data don't bear this out. In fact, the shorter-term Treasury index had an even lower correlation with the S&P 500 than the long-term index."
"Funds in the intermediate-term core bond and intermediate-term core-plus bond Morningstar Categories have also been less beneficial as diversifiers than Treasuries. Both groups exhibited a higher correlation with equities in the most recent data run than they did at this time a year ago. They also exhibited a substantially higher correlation with equities than did the Treasury indexes or the Aggregate Index."
"It's also worth noting that the attractiveness of cash as a diversifier has risen a bit since my last data run. That's likely because the first quarter featured an extreme flight to safety and liquidity, burnishing cash's appeal. Meanwhile, municipal bonds' diversification ability appears to have waned a bit, thanks to munis' rough showing in the first quarter, when pandemic-related worries over municipal finances roiled the muni market."