FSP Academy
Glossary

Correlation

How closely two instruments tend to move together, from -1 to +1.

A correlation near +1 means two assets move in tandem; near -1 means they move oppositely; near 0 means little relationship. It is central to diversification and hedging, but correlations are unstable and often spike toward 1 in a crisis, right when you need diversification most.

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Sizing across positions, correlation, and exposure.

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