Correlation
General Information

Excessive Correlation

At times certain stocks may become correlated and all move in the same direction offsetting the benefits of diversification.  Correlations can “go to 1” in difficult market conditions.  Things you expect to be uncorrelated may become correlated due to crowding, index implications, money flows, economic factors or geographic events.  There is little protection in a bear market outside of short positions and cash.  Investment Masters tend to seek diversification, limit sector exposure, hold cash and constantly think of where the correlation risks lie in the portfolio.- Zeke Ashton

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