Stock Market Basics 100: Correlation, How to Identify Assets That Move Together and Assets That Move Differently
Stock Market Basics 100: Correlation, How to Identify Assets That Move Together and Assets That Move Differently 3-Line Summary Correlation measures how closely two assets move in relation to each other. A high correlation means assets tend to rise and fall together, while a low or negative correlation can improve diversification. Successful diversification is not about owning more investments—it is about owning investments that behave differently. Recommended Keywords correlation, correlation coefficient, portfolio management, diversification, asset allocation, risk management, beta, volatility, ETF investing, long term investing, portfolio risk, stock market basics Table of Contents What Is Correlation? Understanding Correlation Values: 1, 0, and -1 Why Correlation Matters in Diversification Why More Holdings Do Not Always Mean More Diversification Correlation Among Stocks in the Same Industry Correlation Between Stocks and Bonds How to Use Correlation in ETF Investing Why Correlatio...