Week 40 Day 6: Correlation: Why Diversification Actually Works

Correlation measures how two investments move in relation to each other. Correlation of +1 means they move in perfect lockstep. Correlation of 0 means they move independently. Correlation of -1 means ...

Correlation measures how two investments move in relation to each other. Correlation of +1 means they move in perfect lockstep. Correlation of 0 means they move independently. Correlation of -1 means they move in opposite directions. Diversification works because you combine assets with low or negative correlations.