Many investors who thought they had avoided putting all of their eggs in one basket just got egg on their faces instead.

Correlation is a dirty word among professional money managers. The more their investments move in lock step, the higher the risk that one bad day could put them out of business. So, with the flood of cash into financial markets in recent years making it harder to generate returns, the search for uncorrelated assets has become particularly keen.

But by deliberately investing in assets that have shown little correlation in the past, investors may be making those assets more correlated, says Craig Asche, executive director of the Chartered Alternative Investment Analyst Association. If investors find that, say, Pet Rock and corn-dog prices tend to be uncorrelated and decide to invest in both as a result, they will end up driving prices for the rocks and dogs up together.

Also driving financial market correlation, says Massachusetts Institute of Technology finance professor Andrew Lo, is that fund managers are, by and large, using similar approaches to investing, and they are applying them across a swath of assets. "You have investors who are now invested in all these different instruments and they all seem to think alike," he says.

Until Tuesday, what those investors all seemed to be thinking was that there was very little risk in the market. The Chicago Board Options Exchange's implied volatility index -- a gauge of how volatile, and thus risky, options investors expect stocks will be -- was at a decade low. Similar volatility measures for bonds and currencies also showed that investors didn't see trouble coming.