Positive Correlation 2020-07-16 08:00:00

Positive Correlation

A positive correlation represents the relationship between two investments that move together. When one investment is moving up, we can expect the other positively correlated investment to be doing the same. One is not leading the other. They simply have common dependencies that drive their move. Correlation is a numeric value between -1 and 1. -1 means negative correction. These are investments that move opposite each other. 1 represents positively correlated investments. 0 represents investments that move independently of each other. Having a portfolio of zero correlated investments provides diversification. As some investments are moving down, others are flat or moving up.

 


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