Gary S. Williams: Understanding how correlation works
3:00 pm Sun, April 21, 2013
Posted: 3:00 pm Sun, April 21, 2013
By Gary S. WilliamsThe Daily Record Special to the Daily Record
Investors hear a lot about the benefits of asset allocation, that is, spreading your assets among different types of investments to help reduce risk. But less discussed is an equally important measurement: correlation, which is a way to measure how closely related two types of investments are. In theory, you could be invested in multiple securities of differing types and classes, but if they are all closely correlated, your portfolio may not be as diverse as you think — and could open you up to more risk than you intended.
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