Correlation

Correlation measures how closely two return series have moved together, including direction and strength, over a selected sample and timeframe.

Positive correlation means returns tended to move in the same direction, negative correlation means they tended to move oppositely, and a value near zero indicates little linear relationship in the sample. Correlation can change sharply during stress and does not establish causation. Portfolio diversification therefore requires attention to underlying risk drivers, not merely historical correlation numbers or different instrument names.