Sep 30 2020 16 mins 4
Correlation can be used to determine the price relationship between two assets or portfolio positions. The correlation number can be classified into three main buckets: positive (above +0.5), negative (below -0.5) or near-zero (between -0.5 and +0.5). Since assets/positions with a near-zero correlation move randomly with respect to one another, we consider them ideal for diversifying a portfolio as it makes the portfolio more “random”. In the Market Measures at 9am, we will show you how using options can help you achieve this goal much easier than using stocks.
