Broker Check

How Correlated Are Your Investments?

| July 16, 2019
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How Correlated Are Your Investments?

Trade? China? Iran? Election? Interest Rates? What Megan Markle wore? There is always something “brewing” in the world which might impact the financial markets (the last item in that list was meant as a joke - it just seems to be a focal point on the internet lately among many of the top news stories). Up, down, or flat, the direction of the markets depends on numerous factors. While analysts can make educated assumptions, there is never 100% certainty on how the markets will move. Being in tune with your personal risk tolerance may help to ride through any periods of choppiness. How reactive to changes in the market is your portfolio?

One factor that you might consider with your financial advisor is the correlation of your investments in your portfolio. In other words, how do the investments react to the direction of the stock market and how do they move in relation to each other within the portfolio. If the investments consistently move in the same direction, they are highly correlated.

Now, correlation does not guarantee a profit or protect against a loss. However, it might be something to review if you are concerned about all of your investments potentially moving together in response to market events.

This information is provided for educational purposes only and not as advice for any individual.

Seek professional advice before taking any action in regard to your finances.

 

 

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