What is Correlation?
A measure of how closely two assets move together, from -1 (opposite) to +1 (in lockstep).
Educational — not investment advice
Correlation describes the relationship between two assets' price moves. A correlation near +1 means they rise and fall together; near -1 means they move in opposite directions; near 0 means little relationship.
It is the heart of diversification: holding assets that are not highly correlated can smooth a portfolio’s ride, because they are unlikely to all fall at once.
The trap most people miss
Correlations are not fixed — they tend to spike toward +1 in a crisis, exactly when you were counting on diversification to protect you. "Everything falls together" is a recurring feature of market stress.
Frequently asked about Correlation
Does low correlation mean no risk?
No. It reduces the chance that holdings all move together, but each asset keeps its own risk, and correlations can rise sharply in downturns.
How is correlation different from beta?
Beta measures sensitivity to the market specifically; correlation measures the co-movement between any two assets.
Related terms
Guides that use Correlation
See how your own holdings correlate
Add what you hold and Tradune builds a correlation matrix of your positions — which of them move together, the concentration a ticker list hides.
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This definition is for educational purposes only and is not investment, tax, or financial advice. Concepts are explained in general terms; how they apply to your situation can differ. Always do your own research.