The asset correlation is one of the measures to which ISEC Wealth Management attributes importance while forming a portfolio.
Correlation is a worldwide measure of how strong the relationship between 2 or more assets is and how much alike they behave. In simple words, highly positively correlated assets with a correlation coefficient close to 1 react almost identically to market condition changes and both go up or down with the same magnitude. Highly negatively correlated assets with a correlation coefficient close to -1 behave differently. When the first one goes up, the second one will go down with the same magnitude.
The idea of a balanced portfolio that ISEC Wealth Management is seeking is to combine assets with low correlation to manage risks and maximize return.
Disclaimer Risk Warning: The information in this article is presented for general information and shall be treated as a marketing communication only. This analysis is not a recommendation to sell or buy any instrument. Investing in financial instruments involves a high degree of risk and may not be suitable for all investors. Trading in financial instruments can result in both an increase and a decrease in capital. Please refer to our Risk Disclosure available on our website for further information.