By | 2017-09-13T13:23:04+00:00 13th September 2017|

Correlation measures the degree to which two securities move in relation to each other in the financial markets. Correlation coefficients can be calculated, with a value that must always fall between -1 and 1. A perfect positive correlation coefficient of exactly 1 implies that as one security moves, either up or down, the other security moves in lockstep, in the same direction. A perfect negative correlation (-1) means that two assets move in precisely the opposite direction all the time, while a zero correlation implies no relationship at all.