Defining Correlation in Finance

Correlation in finance is the statistical measure of the degree to which two securities are related to its other. This relationship is measured during a certain time period.

Correlations are expressed on a scale of -1.0 to +1.0, as follows:
  • +1.0, two assets move in an identical direction, 100% of all times
  • +0.0, two assets move in random directions
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