Correlation is a statistical measure that determines how assets move in relation to each other.
Correlation tells us how closely one security is related to the other.
The Correlation Coefficient is positive when both securities move in the same direction, up or down.
The Correlation Coefficient is negative when the two securities move in opposite directions.
It is measured on a scale of -1 to +1. A perfect positive correlation between two assets has a reading of +1.
A perfect negative correlation has a reading of -1. weak to negligible correlation
▶️0.2 to 0.4 Weak, low correlation (not very significant)
▶️0.4 to 0.7 Moderate correlation
▶️0.7 to 0.9 Strong, high correlation
▶️0.9 to 1.0 Very strong correlation