Low Correlation in Assets


The correlation coefficient between two assets is a statistical measure of how two assets move in relation to one another.  This relationship  ranges between +1.0 and –1.0.  
  • +1 = Perfect Positive Correlation 
    A positive correlation indicates that two investments tend to move in the same direction at the same time. When one increases, the other tends to increase. The closer the correlation coefficient is to +1.0, the more likely the two investments will move in the same direction at the same time. A properly managed portfolio should have investments that have different risk from one another.
  • -1 = Perfect Negative Correlation
    A negative correlation indicates that returns on two investments tend to move inversely at the same time, as one increase, the other tends to decrease. The larger a negative correlation 
  • 0 = No Correlation
    A zero correlation indicates that the patterns of two investments are unrelated to one another. Returns on two investments are independent and have no tendency to move in the same direction or in opposite directions.