What is market correlation and what are its implications for investors?

 In finance, market correlation is the degree to which assets move in relation to each other. Correlation is used in numerous financial models as a measure of the degree of association between variables.

There are two types of correlation: positive and negative. Positive correlation means that as one asset increases in value, the other asset also increases in value. Negative correlation means that as one asset increases in value, the other asset decreases in value.

Asset classes are often distinguished by their degree of correlation with each other. For example, stocks and bonds are typically uncorrelated, while stocks and commodities are often highly correlated.

Investors can use market correlation to diversify their portfolios and mitigate risk. For example, an investor with a portfolio of stocks may want to add bonds to their portfolio to reduce overall risk.