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A statistical measure ranging from -1 to +1 that describes how two securities move in relation to each other.
A correlation of +1 means two assets move in perfect lockstep. A correlation of -1 means they move in exactly opposite directions. A correlation of 0 means no relationship. Diversification works best when portfolio assets have low or negative correlations. For example, stocks and Treasury bonds historically have had low or negative correlations, which is why a 60/40 stock-bond portfolio has been a popular allocation. During market crises, however, correlations between risky assets tend to spike toward 1, reducing diversification benefits precisely when they are needed most.